Marketing prices go far beyond setting the amount of money a customer has to pay. They can make the difference between selling everything or selling nothing. If you don’t want the second to happen, don’t miss this post where I tell you all about the pricing strategy and how to choose the best one for your products or services. Stay until the end!
Article insight
1 What is a pricing strategy?
2 Why is it important to define a good pricing strategy?
3 Factors to take into account when setting your pricing strategy
3.1 How is the market in which your products compete?
3.2 What are your consumers like?
3.3 You are not alone… how is your competition?
4 Types of pricing strategies
4.1 Market penetration pricing strategy
4.2 Skimming pricing strategy
4.3 Odd or psychological pricing strategy
4.4 Prestige or luxury pricing strategy
4.5 Batch product pricing strategy
4.6 Special offers or discounts
So what is a pricing strategy?
A pricing strategy is known to be made of those resources that a company has at its disposal to set the value of a product. Many factors come into play here: costs, benefits, profitability, etc.
But here we have come to talk about marketing, so I am going to explain what a pricing strategy is from this point of view.
Pricing, from a marketing point of view, is the selection of the right strategy to reach and win over your target audience.
In the same way that you choose the colour, shape, or packaging of a product or, why not, service, the price must have been studied with the same care and care to reach customers and convince them that yours is the best choice.
Why is it important to define a good pricing strategy?
Choosing an appropriate pricing strategy can lead to success, so you should never just do the math and calculate profitability, you have to go one step further.
There is a false belief that many sellers think that the lower the price, the more sales they will get. ERROR!
Imagine that you are going to buy an exclusive moisturising cream from an exclusive establishment and you see how on the shelf the price of the creams is between £50 and £200, but you find one for £15. This cream has the same components as the others, but its price is clearly lower. Most likely, you suspect that they are trying to deceive you or that it is not as good as the others and you end up not opting for this one.
The price, like the rest of the elements that appear in the 4 Ps of the marketing mix, responds to a series of characteristics that must be analysed from a qualitative point of view.
Factors to take into account when setting your pricing strategy
There are three factors you should investigate when setting your pricing strategy from a marketing point of view.
Do not be overwhelmed, surely if at this point you are deciding the price of your product or services, you have more than studied these factors, but it is time to think about how they can influence the final price decision.
How is the market in which your products compete?
You should think about whether the market in which you are going to launch your products is booming or, on the contrary, is stagnant. This will influence your pricing strategy since reaching a young, inexperienced market is not the same as launching your products into a mature market where almost everything is already done.
How are your consumers?
It is very important that you know your target more than yourself. But how are you going to know what they want? Age, lifestyle, hobbies, economic level, and also problems, desires, behaviour, and driving emotions. When deciding the strategy to define the price, you should put yourself in their place and think: would I buy it for that price?
If you want to learn more about this, read our full Audience Analysis Guide. to Stefano AA Article
You are not alone … how is your competition?
You should never belittle your competition when making marketing decisions in your business strategy. You play in the same league, so you must investigate why they sell their products at the price they sell. If your pricing strategy is quite different from theirs (either too high or too lower price), there is still something wrong.
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Types of pricing strategies
Now, it’s time for me to walk you through the different types of existing pricing strategies and how they can benefit you and your business depending on the situation.
Here you have a list of the most important ways to set the price. While it is true that they are not the only ones, they are considered the most important. Remember that each teacher has their booklet.
- Market penetration pricing strategy
The market penetration strategy consists of launching products at a lower price than desired and then increasing it progressively.
This strategy is perfect for those emerging markets where the products or services are not yet well known to consumers. In this way, you will be encouraging them to try it and fall in love with it.
Although the penetration pricing strategy is also frequently used to enter new market areas: geographic locations, audiences, new forms of business, etc.
An example is found in the platforms to listen to paid music. At first, it was crazy to think of paying to listen to music on the Internet, so they had to put very low prices to get the first subscribers and make them fall in love. They did and then raised their prices.
It is very important that the price rise is gradual since otherwise, it could mean the loss of the vast majority of consumers or users by feeling cheated by the change.
- Skimming pricing strategy
This pricing strategy is based on the complete opposite of the penetration strategy. That’s right, it basically consists of reaching the market with a higher price than the desired one to later lower it progressively.
It is likely that logic right now makes you think that this is crazy, so you have to be very careful if you decide to bet on this strategy.
If you opt for this pricing strategy, your target audience should be characterised by being trendsetters who want to try everything before anyone else. Yes, it is, green light, go for them.
This is the perfect strategy for emerging markets, such as, for example, technology. Well-known technology brands launch their latest innovations at high prices so that only a “privileged few” can buy them, but after a while, they lower their prices.
- Psychological pricing strategy
Maybe just saying psychological pricing strategy nothing comes to mind, but if I tell you that they are those ending in ’99, things change.
And why are they called psychological or odd? Because they consist of reducing prices slightly so that it appears that they are cheaper than they are.
Western humans are used to reading from left to right, so the first thing they notice is the first number that appears. In this way, if your product costs € 30 and you set its price at £29.99, the consumer is left with that it costs twenty and not thirty.
To see an example of this, I invite you to walk through any supermarket. Before reaching the second aisle, you will have already seen more than ten products that use this strategy.
- Prestige or luxury pricing strategy
Although a priori this may seem like a strategy similar to skimming, they are not the same. The prestige pricing strategy consists of giving your product or service a high price to then keeping it.
This strategy has to be entirely linked to the quality of your product. If your product is not of sufficient quality or is not perceived by the public as high-end, no one will buy it.
It goes without saying that these types of strategies are aimed at those high-end markets in which the target audience is very small. As a clear example, you can think of luxury cars, characterized by their good brand image, excellent quality, and price not suitable for all pockets.
- Batch product pricing strategy
The batch pricing strategy is to sell a set of products in a grouped way at a lower price than if they were separate.
Ideally, if you are going to use this strategy is that you sell complementary products, that you know that the use of one depends on the other and vice versa. In this way, you are giving added value to consumers.
A psychological factor also comes into play here, as the perception of customers is that they are taking a larger quantity of products for less money.
One of the most popular examples in recent times is when alcoholic beverages are sold in a pack with soft drinks.
- Special offers or discounts
We can’t talk about pricing strategies without mentioning offers or discounts. At this point, I think it is not necessary to define what kind of sale it is, but here it goes: it consists of selling a product at a reduced price for a short period of time.
In general, these types of strategies are carried out to get rid of excess stock on specific dates: seasonal changes, sales decline, etc.
What is the best pricing strategy for your business?
Just keep in mind that the people you need to convince through your pricing strategy are your ideal clients.
So, it all depends on them, on what they expect and how they feel.
Analyse deeply your target audience, get to know any single aspect of them. This will help you understand what pricing strategy is the best for your business to have a high conversion rate.
Do you need help with it?
Serendipity Marketing is a leading full-service digital marketing agency London, delivering services internationally in three languages: English, Spanish, and Italian.
Our unique approach mixes marketing strategy and psychology science, allowing us to uncover your target audience driving emotions and behavioural patterns and create efficient strategies for any business.
This makes us a leading internet marketing agency London requested from businesses of any size to improve their marketing and conversion rate.
Rely on an expert digital marketing agency London for your pricing and marketing strategy.
