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Pricing Strategy To Maximise Sustainable Profits

Competition Based Pricing In Marketing

How great firms can unlock what they already know to craft compelling marketing and connect with clients. The number #1 reason your digital marketing hasn’t worked in the past. Associating your services with particular uses is another way to position yourself. An accounting firm, for example, might position itself as the go-to expert on real-estate investments or high net worth individuals.

The Great Pricing Challenge For Professional Services

After all, your hard work will go to waste if you don’t have potential customers. To do so, you’ll need to examine different pricing strategy examples, their psychological impact on your customers, and how to price your product. Scan competitors’ product descriptions, reviews, and specifications to determine how they came up with the price. There’s leeway to charge extra for your product if it’s better quality.

Geographical Pricing

As the only revenue-generating ‘P’ of the marketing mix, price plays an important role as a tool that helps in achieving your marketing objectives. The common practice for setting prices is to cover the cost of goods, and undercut the competition. While it’s common practice, this method is far from best practice. A company’s chosen pricing model must accomplish three goals; profitability, increasing willingness to buy, and support the product positioning.


Discover more about Competition Based Pricing In Marketing here.

Signs That Your Digital Marketing Strategy Needs A Makeover

Remember, customers who visit a price comparison website are likely ready to buy. So as an online merchant or small business, use this to your advantage to target customers and prioritise the products you want to push. In fact, large corporations may struggle on price comparison websites because they are more likely to have strict standards and slow to implement changes on product pricing changes. Large companies struggle when competing with small businesses and online merchants offering the lowest possible price.

  • Leverage your unique selling proposition and value adds like free shipping, installation, bonus, warranties, etc.
  • Almost any product or service can be differentiated from competitors through exploration and positioning, as well as a well-written sales page.
  • The topics in this piece could also be dealt with in a different order.
  • Even then, setting a price for a new product, or even an existing product line, isn’t just pure math.
  • This implies reference to state/territory and federal consumer, competition and other laws which affect all businesses.
  • To begin with, there’s no one strategy that should be used at any one time, and no demand for you to stick to the one you choose.

Your brand determines whether your products will sell at a discount or a premium. Your organisation may be sales driven and may be prepared to offer the product at a price that will generate large sales volumes. Depending on the price set, a sales driven pricing strategy may lead to a price war.

Pricing Strategies To Suit Your Optimal Marketing Mix

Your costs include insurances, web hosting, lease and utilities. Cost-based pricing is straightforward to figure out, but does not factor in demand, including people’s willingness to pay, or your competitors’ pricing. Pricing has a substantial and immediate effect on your business’s profitability. It signals value to your potential clients and positions you amongst your competitors. Numerous factors come into play, including demand for your products/services, value and perception of value, competitiveness, and willingness by your clients to pay. Sometimes other indices or rates such as CPI/inflation rate, labour or material cost indices or interest rates may be involved in the pricing strategy.


The wrong pricing strategy can see your competitors chosen ahead of you. Again, since a good’s price in a monopolistic competitive market always exceeds its marginal cost, the market can never be allocatively efficient. While some firms are positioned to price above competition, others wish to carve out a market niche by pricing below competitors. Pricing above competition generally requires a clear advantage on some non-price element of the marketing mix.

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These customers focus on fairness and quality of the products for sale. Also, this strategy relies on feedback from customers and potential customers but takes time to get right. It also allows you to get close to and build trust with your customers. This strategy focuses on selling products at a loss, to entice customers to continue shopping and buy products with bigger margins.

A pricing strategy takes into account segments, ability to pay, market conditions, competitor actions, trade margins and input costs, amongst others. It is targeted at the defined customers and against competitors. Pricing encompasses not just a monetary value attached to a product or service; it also carries the firm’s desired profitability and costs incurred. This comprehensive training is customised to guide businesses through their pricing efforts outlining the best innovative value-added pricing strategiesto increase profits. This training will also provide the opportunity to study the pricing strategies implemented in other successful companies. One of the benefits of price skimming is that it allows businesses to maximise profits on early adopters before dropping prices to attract more price-sensitive consumers.

Competitive pricing, also referred to as market-oriented pricing, compares similar products from competitors in the same market. Generally, to control your stock levels, you should increase prices when you have a shortage and decrease costs when you have a surplus. Customers have price expectations about your products before they visit your store and other stores.

Choosing the right pricing strategy strengthens your ability to achieve turnover and profit in line with your objectives. In unattended or digital B2C businesses, having a customer relationship is still hard, but the product or service may lend itself well to interactions with customers. Checking costs and margins is very important, but it must not become the pricing strategy alone. I cannot put enough emphasis on the importance of avoiding a blind “cost plus” practice. Looking at costs must be done only to verify prospective margins.

Competitive Pricing Definition – Investopedia

Competitive Pricing Definition.

Posted: Sat, 25 Mar 2017 19:58:16 GMT [source]

Customers often search for price comparisons when purchasing items online. Meeting a competitor’s price could be the deciding factor in whether or not they buy from your ecommerce store. You could also be seen as the discount brand—something many retailers try to avoid. A competitive pricing strategy uses the price set by competitors as a benchmark. There is no consideration for the cost of goods or demand for the product. This strategy is best adopted in saturated markets where price is the deciding factor for a consumer.

How To Better Value Your Services

It’s important to have a clearly defined idea of your target market and of what the product represents. Once you do, work out the pricing strategy that fits those best. Revenues will rely heavily on high sale volumes – so it’s important to stay vigilant around your production costs and market demand. Grocery stores often use economy pricing by producing their own no-frill lines of common products such as biscuits or condiments. It can be incredibly effective when done right as there is always a market for thrifty consumers, or those tightening their purse strings to save or get out of debt.


Other examples come from perishable products/services such as food or tickets. The good news is that pricing options can be combined and added up to create new strategies. As a discipline, pricing is part of marketing, but it’s often done by either finance, strategy or sales, sometimes with a bit of friction between them. If the founders are still involved in running the business, they may be the ones making price decisions.

The Theoretical Problem With Cost

Read more about product pricing marketing here.

Generalising about price elasticity can be fatal—as can basing pricing strategy on incorrect assumptions about your industry, life cycle, competition, total product, and price perception. It’s all good and well to have a brilliant team and an even more brilliant product – but you still need to sell it. And to do that effectively, you can’t just stick it on the market and hope for the best. You need to know about the different types of pricing strategies, and then pick the one that is best for your competitive market so that you maximise profit. You might have heard dynamic pricing referred to as demand pricing, surge pricing or time-based pricing. There are even different types of dynamic pricing, including price discrimination or variable pricing, price skimming and yield management.

If that market consensus lacks, there’s no pricing alone that will save the boat. The execution of a pricing strategy can be a delicate activity where the success of a pricing strategy is made, especially with a variable or dynamic pricing where prices are frequently reviewed and changed. All businesses test and change over time, and your compact size and management structure make it far easier to make changes quickly. Your sales are a good source of proof when deciding if and when those changes need to be made. So it pays to have an integrated payments system that tells you how much your selling, when and to who.

Do you know any more marketing pricing strategies that we haven’t mentioned, or you just want to join the conversation about how businesses go about thriving through knowing how to set a price? The most important factors influencing your pricing strategy are rooted in your financial data. First and foremost, you need to know what it costs to produce your products or provide your services. You need to continuously monitor these costs so you can quickly react to changes and maintain long-term profitability. Competitive pricing is when your prices either match or beat those of similar products that are sold by competitors. Often this simply means selling your products or services at a better price, but you could choose to offer better payment terms instead.

Which pricing policy is used by Pepsi and Coke?


That is why Coca Cola charges the same prices as are being charged by its competitors. Otherwise, consumers may go for Pepsi Cola in case of availability of Coca Cola at relatively high price.

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Hence the importance of understanding what exactly is the CVP in the customers’ perception. If well done, this can impose a disruption or a new category to the market. Designing a CVP around a low price point usually works well for temporary initiatives such as discounts and offers. If not, a new CVP around a constantly low price is riskier and must be planned carefully. If the new CVP turns out to be undifferentiated in the customers’ perception, it may lead to unhealthy price wars.

Keep in mind that because direct pricing measurement asks about pricing directly, researchers assume that survey respondents have a certain level of familiarity with the product or service. Additionally, the Gabor-Granger technique does not take competitive pricing into effect. Very common that business owners set up their prices once and it stays like that for a long period of time. Here is the most used pricing strategies that you can use in your business and charge what you really worth it. This strategy is all about determining what a customer values a product or service at, and how much they are willing to pay for it.

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