The pricing or pricing strategy is one of the key elements of your marketing plan . The price of your product or service will determine your level of income and benefits and will influence your positioning with respect to the competition and your brand image. Ultimately, choosing the right price can mean the difference between the success or failure of a brand. But how can you make sure you get it right? We explain the factors to take into account in your pricing strategy and the best pricing strategies. Do you want to know 40 marketing strategies to launch your product ? Click here and download our free ebook Pricing how to develop a perfect pricing strategy Factors to consider in your pricing strategy Pricing is one of the decisions to be made when launching a new product or service, but that is not the only time when it is convenient to reflect on the brand’s pricing Hungary Business Email List . We must also review prices to develop our positioning plan or do marketing tests. In addition, it is recommended to evaluate our prices every one or two years to see how they perform against the competition and customer expectations, as well as whenever we detect a problem that may be motivated by an incorrect price. Before choosing a pricing strategy, it is necessary to do a price analysis that takes into account these factors:
The actual cost of the products or services. Here we must take into account both the cost of manufacturing the product or offering the service and the cost of acquisition in marketing terms. The average value of the customer’s lifetime , that is, the total expense that we can expect taking into account the average amount of purchases, the number of purchases per year and the number of years that the customer remains loyal to the brand. Whether the demand for the product or service is elastic (it responds a lot to price changes) or inelastic (it remains stable even though the price fluctuates).Your income objective , which will be linked to the growth prospects of your company. How is your buyer person and the market segment you are targeting in relation to prices, for example, if they are very sensitive to discounts and offers, if they compare prices frequently or if they give a lot of importance to status. The prices of the competition . If there are already products that are very similar to yours, you can compare the prices to guide you in the pricing strategy. Keep in mind that if your product offers some differential value, such as higher quality or additional services, this difference may mean a higher price. The market situation and possible legal limitations on prices. 12 + 1 examples of pricing strategies
1) Cost-based pricing This pricing Hungary Business Email List is the simplest of all: we calculate the cost of our product or service and add a margin to it that allows us to reach the company’s objectives. It is a very popular strategy for physical products. In order for it to work properly, not only the direct costs of manufacturing the product must be taken into account, but also indirect costs such as operating expenses, employee salaries, new product development, etc.
2) Price based on competition This pricing strategy is based on the analysis of the competition that we carried out in the previous section. Once you know the average price of your competitor’s products, you can choose one of three strategies : Keeping your price around the market average : the safest strategy. Set your price below the market average: this option will allow you to attract competitive customers and increase your market share, but in return it involves the risk of entering a price war with companies more established than yours. Set your price above the market average: if your product has a notable advantage over the competition, you can take advantage of it to set a higher price and position yourself as a quality product.
3) Anchor price The anchor price works for products that have different levels or more or less premium options, for example, software with different subscription packages. What we do in this case is to set a high price and put another option with a lower price. In this way, there is a “discount effect” whereby the consumer perceives that he is taking the product for less than it actually costs.
4) Freemium price Pricing freemium is a very common strategy in digital products, in which companies offer a basic version of their product for free in the hope that users will end up paying for access to more functionality. The free version has the function of expanding the penetration of the product or service and gaining the trust of users before the final purchase decision. On many occasions, this strategy is combined with the previous one, that is, the paid version has several price levels and one of them serves as an anchor.
5) Price based on value In value-based pricing strategies, the company sets the price of products or services based on what the customer is willing to pay . This option is the one that is most in line with the needs and desires of consumers, so it can have a very positive impact on brand perception and loyalty. In return, it requires knowing our buyer persona very well and even adjusting the price based on different customer profiles.
6) Dynamic prices The dynamic pricing strategy is based on continually adjusting the price based on demand, the price of competitors, and other factors. The most typical example is airline flight prices. By calculating the optimal price at all times based on an algorithm, the company ensures maximum profitability.
7) Price per hour In this strategy, the price responds to the number of hours used to provide a service. It is very common in consulting services, freelancers and other companies that provide business services.
8) Price per projects The project pricing strategy is the opposite of hourly pricing: instead of directly trading time for money, you pay a flat fee per project . It is used by the same type of professionals and services as the previous one. The flat rate allows you to link the price to the value obtained and not to the time spent, which in theory can increase profitability. But you must be careful to do the calculations correctly and expect that some projects will present complications and will end up taking more time than initially planned.
9) Premium price The premium pricing strategy is based on the perceived value of the product , rather than actual costs. The price is high to mark a distinction and present the products as a luxury. It is especially advisable for brands whose clients are status sensitive.
10) Price “skimmed” In this pricing strategy, the product has the highest possible starting price . Subsequently, its price goes down little by little to reach a wider market share. The most typical example of “skim” prices are technology products, the perceived value of which is higher the less time has elapsed since their launch.
11) Price of penetration The penetration pricing strategy is defined in opposition to the previous one: instead of going from high to low, the price goes from low to high . That is, you start by launching the product with the lowest possible price and progressively increase. Typically, the initial price is not sustainable in the long term, but it does serve to quickly build a customer base. This system works very well for new brands that want to establish themselves, or for new products that want to gain market share in a segment with a lot of competition.
12) Price per packs This strategy focuses on offering two or more complementary products or services together and selling them for a single price. You can choose to sell those products only as part of the pack, or sell them both as a pack and individually. It is a very useful strategy to increase the average amount of the purchases.
13) Psychological price The psychological price is based on using different “tricks” that make a price attractive to us and therefore incentivize sales. These are some of the most used techniques : Prices ending in 9 or 5. Offers type “buy one unit and get the second with a 50% discount”. High prices without rounding, for example “8,343 euros”, which give us the feeling that the price has been adjusted as much as possible. Show discounts less than € 100 in percentage and those greater than € 100 in number. Design tricks like changing the font, size or color of the prices.