Pricing Strategy tailored to your unique situation (not copied from another business).
Ideally, setting price should be straight forward.
However, prospering from strategic pricing to ensure optimal profits and sustainable competitive advantage, means you have to apply a scientific approach towards pricing policy and implementation.
Like all parts of “the marketing mix”, pricing is completely inefficient in a silo! Pricing is just as important in the “management of exchange” between seller and buyer as product, promotion distribution, positioning, people, processes and environment; and needs to be fully integrated and coordinated within the Marketing Mix.
Hence, Pricing MUST be a Marketing-led activity… synchronized with Positioning, Product management, marketing communications, Internal Marketing, aligned to Distribution and Supply/Demand Chains, responsive and in-tune with your processes and acceptable to stakeholders… while all the time being appropriate from a compliance, implementation and management perspective.
Pulling a price “out of the hat”, applying prices you can “get away with”, pricing on a cost-plus basis, or pricing reactively, all undermine long-term capacity for your business to prosper at an optimal level.
Pricing expertise comes from in-depth understanding of the dynamics of marketing, consumer behaviour, and based upon academically-proven models and supported by commercially sound research.
No two organisations are alike. Different product categories mean different dynamics.. Geography, culture, technology, laws and guidelines, ethical nuances, ecological factors, industry structures, power balances, seasons, climates, economic buoyancies, competitors, vary from industry to industry, market to market, segment to segment… so if you employ a Pricing Strategy that “worked” for someone else… it is like randomly using someone’ else’s blood and hoping that it matches your own.
Understanding Pricing Metrics can make profits soar! Applying appropriate product analysis models, the 8 P's, PESTLE, 5-Forces in concert with accurate behavioural analysis of target segments means your pricing strategies will maximise profits while sales are outperforming competition.
Using research, you can discover the right price to sell at, the right price to discount at, the right price to wholesale at, offer RRP for, and re-positioning to, to significantly improve profits with damaging sales. Ask for price optimisation research now for maximum profits... CLICK HERE
Value-based pricing uses buyers’ perceptions of value, not the seller’s cost, as the key to pricing. The organisation uses non-price variables in the marketing mix to build up perceived value in the buyers’ minds. Price is set to match the perceived value.
However, Value-based Pricing can be flawed if segments are ignored or misunderstood. Generalising about price elasticity can be fatal... as can basing Pricing strategy of incorrect assumptions about your industry, life cycle, competition, 'total' product, and price perception.
Different objectives influence pricing strategy choices. Some of these include:
The price you set tells much about the product, the brand, the Company, its position in the industry and the likely value the buyer will derive. The wrong price can send a disastrous message!
Heralded as the 'best' strategy, value-based pricing can potently in improve profits & marketing advantage... It can also threaten future product. Value-Based Pricing needs thought.
Strategic Marketing Science provides nine different strategies for Pricing based on product quality (see below). Best selected in context of your product and brand portfolios.
The reality is sometimes Strategic Pricing is contextual to competitive pricing or other uncontrollable factors. Product Type Pricing Strategy can deliver new options.
Organisational resources, marketing effort & budget play in selecting the best Pricing Strategy. Marketing-mix variant pricing strategies keep your business in play and your cash flow intact.
Cost-based pricing, historical pricing, legacy pricing, opportunistic pricing, desperation pricing all have a place... We help you apply pricing strategies that achieve desired corporate objectives.
The price of a product changes along with its life cycle. The introductory stage is the most challenging stage for new products.
Companies may use marketing-skimming pricing when they introduce innovative new products. Such companies set a high price in order to maximise their profit quickly. Is this a good strategy... well is depends... Talk to us and we'll explain why...
The key to a winning Pricing Strategy, is for Pricing to be integrated and coordinated with ALL the other components of the Marketing Mix, or remain hopelessly sub-optimal. You must incorporate customer value, competitive marketing dynamics, and your own corporate strategy.
Without in-depth strategic pricing knowledge, pricing strategies can be so complex they take years of work to implement. Some pricing problems exist despite business knowing they have a problem. Many persevere not knowing their pricing strategies are eroding profits, interfering with sales, hampering reputation and undermining competitive advantage.
Understanding buyer behaviour, of all segments in a market, whether its in a B2B market, or a B2C market, is a key factor in pricing for success.
Price and pricing strategy is interwoven tightly with all other elements of the marketing mix... change the product and you need to review the price (make sense?)... change the distribution, you'll also need to modify price, change the advertising means reviewing price, so does changing processes, changing the people who support the product, changing the positioning... all demand price strategy re-development.
Advanced pricing strategy is about advanced marketing management: Real-time, for each individual segment! Most importantly, price can be the most scientifically manageable, and most potentially powerful, profit-generating tool in the marketing mix.
IMPORTANT: The "rules" vary according to budgets, goals, resources... AND according to specialisation (product type), product category, competitive positioning, category life-cycle, segments, target audience, etc... In other words, you really need an expert if you're going to do it properly. Call or email to arrange a consultation & advice. Call 02 8011 4355 NOW.
Often referred to as Pricing Strategies, these are some of the Pricing Tactics that might be employed by businesses wanting to improve their business performance. [NB: This is a brief overview and choosing these tactics, without considered strategy, might be unsuitable for your business.]
|Penetration Pricing||Where a low price is set to attract volume sales & fast-growth market share, undermining competitive products by offering significantly improved, comparative value.||If market segments can be identified that demand greater value from lower prices. According to how well sales objectives are met, Cascade-Up tactics can follow.||Subject to long term strategic planning, likely to accompany 'lean' margins, this can be a fatally dangerous or highly beneficial manoeuvre.|
|Cascade Up Pricing||Where an initial low price, delivering extraordinary value, is gently increased, within the target audience latitude of acceptance attached to the consequent, price-induced product perceptions.||A car manufacturer sets a low price to get a sustainable volume of car sales but increases the price over time as the market picks up on the superior value being delivered.||As long as value is greater than price - this tactic will not interfere with market share growth.., A proven by Toyota in the mid 70's in Australia.|
|Premium Pricing||The price is maintained and consistently high as an indicator of 'quality' of the product.||Examples of products and services using this strategy include Harrods, first class airline services, and Porsche.||In the early 80's, BMW increased price to moved its perceptual positioning from medium to premium... successfully re-establishing itself in the premium segment.|
|Skimming Pricing||Innovative newness creates temporary premium products so prices start high. Skimming also allows control over demand where incapacity to produce adequate volume to satisfy potential demand, this approach commands high margins with prices that appeal to price-inelastic market segments.||De Beers sets a huge premium on diamonds, knowing it could sell more at lower prices but choking supply to reinforce positioning, and maximising margin.||Long-term maintenance of skimming pricing can attract new competitors into the category or industry.|
|Cascade-Down Pricing||An initial high price is set on launch, with a consequent series of downward price changes as product life cycle moves through its five phases.. The objective is to maximise profits in each market phase.||Sony reduces the price of their innovations as they age, over 5 years, charging a premium at launch and lowering the price through the life cycle.||Consumer expectations are so entrenched that potential adopters of an innovation purposefully delay buying until initial price reductions are introduced.|
|Competition Pricing||Setting a price relative to competitive pricing. Pricing lower, higher or the same according to competitive positioning and value offering, general rivalry and segmentation factors.||Pepsi and Coke charge significantly more for Cola than lesser known brands… but avoid "prisoners Dilemma" by staying non-price competitive with each other.||The greater product meaningful differentiation, the less important competitive pricing.|
|Premium Pricing||The price is maintained and consistently high as an indicator of 'quality' of the product.||Examples of products and services using this strategy include Harrods, first class airline services, and Porsche.||Inaccurate or inadequate market research can result in sub-optimal profit generation.|
|Product Line Pricing||Charging different prices for different products across a range of products with the same brand.||Apple Macintosh laptops offered with different processors, storage, and screen sizes to appeal to different users.||Products can cannibalise each other's sales. Too many options confuses & undermines intention to buy.|
|Bundle Pricing||Offering a combination or additional products in the as a single package' which is acquired as an indivisible unit.||Buy one and get one free (BOGOF), accommodation and flight packages, free add on promotions, etc.||While supermarkets like BOGOF tactics, customers can be annoyed, or frustrated by them.|
|Psychological Pricing||Research has discovered certain anomalies of various price points... Subject to an array of factors. Psychological Pricing attempts to optimise price using known/ proven irrationalities of consumer behaviour.||Charging $2.99 instead $3.00, writing a ticket as $3000, instead of $3,000.00, etc..||There is debate that these techniques have wear-out. There are also issues around ethics of Pricing.|
|Cost Plus Pricing||The price of the product is production costs plus a set amount ("mark up") based on how much profit (return) that the company wants to make. Although this method ensures the price covers production costs it does not take consumer demand or competitive pricing into account which could place the company at a competitive disadvantage.||For example a product may cost $100 to produce and as the firm has decided that their mark up will be 25%t they decide to sell the product for $125 i.e. $100 plus 100/100 x 25||Ignores customer needs wants, perceptions and willingness to 'marry' perceived worth to the exchange.|
|Cost Based Pricing||This is similar to cost plus pricing in that it takes costs into account but it will consider other factors such as market conditions when setting prices.||Cost based pricing can be useful for firms that operate in an industry where prices change regularly but still want to base their price on costs.||Traditionally used in commodity and industrial marketing, where marketing expertise is absent or insignificant.|
|Value Based Pricing||The "Total Product" has significant effect on psychology of buying behaviour, as does Product Type. Behavioural and situation segmentation creates value-based pricing opportunities. This pricing strategy considers the value of the product to consumers rather than the how much it costs to produce it. Value is based on the benefits it provides to the consumer e.g. convenience, well being, reputation or joy.||You can command a premium price for an umbrella when it starts raining. Condoms are offered by vending machines in men's rooms of night clubs. Baby formula becomes or expensive in non-traditional retail hours. BMW changed to VBP in the 80's… what have the consequences been? Firms that produce technology, medicines, and beauty products are likely to use this pricing strategy.||Understanding and management of segments an customer post-purchase cognitive dissonance are key issues. Is it "fair" to charge an 'extreme' margin for a life-saving drug? Is it 'right' to sell placebo products?|
If you have read this far, you are probably ready to engage a pricing strategy marketing consultant. Here's a few more reasons...
So, why not do it now... Just email us by clicking this button, or fill out this form and a consultant will get back to you ASAP. Remember, "Procrastination is the thief of time" and the sooner you act, the sooner you'll achieve your goals!
Or WEBMAIL your request for more information, a call, or to meet with a qualified expert on a no-obligation basis, fill out the form below...