Whether you are just starting a new business venture or you are locally or regionally established but want to become a global competitor, you must be able to set your prices at optimum levels. So why is solid price management so critical to success? It is crucial to get it just right because pricing has a substantial and immediate effect on your profitability.
Out of The 4 Ps of Marketing, Price Is The Only One Linked to Revenue
Most business people know what product, promotion and place mean in a marketing strategy, but the term price (management) can present some challenging variables that need to be plugged in to create the right formula for your particular business. Price management is a closed-loop process whereby companies analyze, plan, publish, execute and negotiate price. If you don’t have effective pricing, a small variation up or down has been known to raise or lower profitability by as much as 20%.
Popular Pricing Strategies
What makes the pricing piece so tricky is that you have to include so many other factors, such as the age and uniqueness of your product, the competition in your industry, your cost of producing the product, etc. There are basically 6 widely-used strategies. Premium Pricing sets the price higher than competitors and is often used at the beginning of a product’s lifecycle. It works best with unique products when the value can be established. Market Penetration Pricing is used to increase awareness and lure customers away from competitors. Economy Pricing appeals to price-conscious consumers, while Psychology pricing preys on consumer emotions rather than logic. Price Skimming sets a higher price in a product’s introductory phase and then slowly lowers when revenues stabilize. With Bundle Pricing, consumers get better pricing for multiple product purchases, usually complementary products.
Successful Companies Must be Agile with Pricing Strategies
The process for making pricing decisions must be well thought out and followed. Pricing decisions should never be randomly made in made in a vacuum without important key leaders. How you plan your strategy and put the checks and balances in place to carry it out will provide the history and experience you will need for later pricing strategies. Making sure you have the right people onboard as well as ensuring ownership and accountability of the pricing strategy process is tantamount to your success.
Don’t Delay If You Need Help With Pricing Management
If you are looking to increase your sales conversions you will want to pick a business partner that can help you simplify your buying and selling experiences. You should familiarize yourself with the importance of aligning your business with what modern omnichannel customers need. Whether you have a new business and need help pricing a new product or you have more complex pricing needs, you will need a company that will be a seamless extension of you and an enhancement to help you digitally advance your sales. You can try checking CPQ tools or let FPX help you with this process. Go to https://www.fpx.com/ now to find out more.