Pricing strategies are a sometimes-overlooked part of the marketing mix. They can have a large impact on profit, so should be given the same consideration as promotion and advertising strategies. A higher or lower price can dramatically change both gross margins and sales volume. This indirectly affects other expenses by reducing storage costs, for example, or creating opportunities for volume discounts with suppliers.
Other factors also determine your optimal pricing strategy. Consider the five forces that influence other business decisions: your competitors, your suppliers, the availability of substitute products, and your customers. Positioning how you want to be perceived by your target audience is also a consideration. Price a premium item too low, for example, and customers will not believe the quality is good enough. Conversely, put too high a selling price on value lines and customers will purchase competitors’ lower-price items.
Some pricing strategies to consider are:
- Competitive pricing
Keeping your prices in relation to your competitors is the best way to do business. Stay alert about how much your next-door competitor is pricing their products and then price yours similar or lesser to theirs.
- Cost plus mark-up
The complete reverse of the previous mode of tactics, this aims at fixing your prices according to your wish, as per the gain percent you want to keep and not the market. But just as this has the advantage of gaining you lots through setting cheap prices, this may also work adversely under certain circumstances. So think and decide wisely before setting the price.
- Loss Leader
Another effective strategy to woo customers and raise sales considerably is to sell relatively cheap items at a lower price to customers who have the potential to buy more expensive things. But this is a relatively temporary arrangement and can often prove to be a gamble.
- Close out
This is an interesting technique to try when you are clearing out your stock. This method involves selling your extra goods at extremely cheap rates in order prevent losses.
- Membership or trade discounting
Know your customers. Short list the ones who can reap you profits and give them special offers so that they end up getting wooed into buying more from you and also keep coming back. So reduce prices, give discounts, do what it takes to get them back into your shop.
- Bundling and quantity discounts.
The simple one plus one free also works great. So give select customers a considerable discount on bulk purchases, either of the same kind, as in 5 shirts, or similar or related items. And to avoid losses, put offers on old stock or team up one new with old to clear out excess goods.
Putting different versions of the same basic product and then offering lower prices for the more basic models is a good way to not only get rid of those models to average people. But one can also team up offers like free servicing for a period with the higher priced ones to work as incentive for the high purchasing customers.
So go ahead and use these tactics to get the level of profit you’ve always desired.