Are you curious to get insight into the top pricing strategies? You have landed on the right page. Read on!
How much to charge customers is one of the crucial decisions for a company. Not only can it be a tough decision, but many things are dependent on how you are going to price your products.
Keeping your prices too high can make your sales graph go down, and keeping your prices too low can stop you from earning revenue. But there is nothing to worry about because we have some news for you.
Gladly, effective pricing is not that difficult to achieve anymore. There are many pricing strategies that you can adopt to come up with the right prices for your products.
So that being said, in this blog, we have listed the top 10 pricing strategies you can implement to price your products. But what are those pricing strategies? Stick through and find out!
Pricing Strategy No: 1 ==> Dynamic Pricing
This pricing strategy goes by several different names, time-based pricing, surge pricing, demand pricing, dynamic pricing, you name it.
The dynamic pricing tends to fluctuate as per market or buyer demand. How much the customers are willing to pay and what the market demand is, determines the algorithm for this pricing strategy.
Some of the industries where this pricing strategy shines are:
- Event management companies
- Hotel companies
So in order to implement this strategy, you need to keep some factors in mind, for example:
- What are the prices that competitors are offering?
- What is the market demand?
By using this strategy, companies can easily make changes to their prices to match their offerings with consumer and market demand. Therefore, dynamic pricing is one of the best pricing strategies to make use of if you are into a business that suits its nature.
Pricing Strategy No: 2 ==> Cost-Plus Or Markup Pricing
Markup pricing strategy is focused on the cost of goods sold. Companies often use it to markup products they sell by basing it on the profit they are likely to make.
Markup price = The price added to the cost of goods sold to cover overheads.
A cost-plus pricing strategy is best suited for businesses that deal in physical products. However, this strategy can not benefit SaaS businesses that aim to offer their services through computer software.
Another reason that this pricing strategy is not beneficial for SaaS companies is that thier production cost is low compared to the value SaaS products provide.
Pricing Strategy No: 3 ==> Freemium Pricing
The word freemium is the blend of two words, “free” and “premium.” It is one of the coolest pricing strategies for SaaS companies to utilize.
In this strategy, firms provide a working yet free version of their software with limited functionalities to the users to try it out, hoping for them to upgrade to the paid version.
The reason companies widely use this strategy is because a free trial enables users to get their hands on the software. In this way, it builds trust among the customers. Not to mention, it also provides customer satisfaction before the actual purchase, leading them to buy the paid version.
Pricing Strategy No: 4 ==> Hourly Pricing
Have you ever traded your time for money? If you have, then this is what we call hourly pricing. People like lawyers, freelancers, and contractors who charge their fees based on the hours they put in to provide their services prefer the hourly pricing strategy.
However, clients have a mixed opinion about this pricing strategy, as some of them think that it rewards labour more than efficiency. But there is no doubt in the fact that a vast majority of professionals use this strategy worldwide.
Pricing Strategy No: 5 ==> Skimming Pricing
Skimming pricing usually comes into play for electronic devices or tech-related products. The concept of price skimming is pretty simple. The concept suggests that the prices of the products must be set to the highest(during launch). And should decrease gradually with time as the product becomes old or after the launch of the new model of that product.
Companies that devise smartphones, video games, music players are the ones that use this pricing strategy. But what price skimming has to offer?
Well, price skimming aids in recovering the sunk costs. And helps to sell more units effectively.
Pricing Strategy No: 6 ==> Penetration Pricing
Unlike skimming pricing, penetration pricing is the pricing strategy that companies implement to draw consumers’ attention away from highly-priced products or competitors by offering low prices.
This strategy aims to offer low prices for the sole purpose of selling maximum units. However, it can have an adverse effect on the revenue in the long run. But that does not mean this strategy can not be beneficial for a short period of time.
Therefore, penetration pricing serves well for new companies that want to spread their word and gain market share in a competitive marketplace.
Here are the examples of the companies that use penetration pricing:
Pricing Strategy No: 7 ==> Premium Pricing
Premium pricing strategy is implemented by companies that want to convey the message that their products are of extremely high value and are rare to find in the market. That being the reason, businesses that adopt this pricing strategy keep their products’ prices higher compared to their competitors.
Therefore, products sold by using a premium pricing strategy are considered a status symbol.
Now here comes the essential question. Which are those brands that use this pricing strategy?
Here are the examples:
Pricing Strategy No: 8 ==> High-Low Pricing
This pricing strategy is operational when a business begins with selling its products at a high price and tends to drop the price down as the products lose the limelight(relevance).
The year-end sales or the discounts that companies offer is the perfect depiction of high-low pricing. So if you have ever shopped for something that was on discount, you probably have seen a high-low pricing strategy into action.
Furthermore, this pricing strategy works best for companies that sell ever-changing products like furniture, garments, etc.
But why does this strategy work in the first place? Well, everybody loves discounts, do they not? Therefore, discount days like Black Friday never go out of fashion.
Pricing Strategy No: 9 ==> Value-Based Pricing
Value-based pricing comes into action when firms sell their services or products according to the customer’s willingness to pay. Even if a company’s products are worth more, they tend not to charge more than the customers’ interest and their will to pay.
Keeping prices as per customer interest helps companies to gain trust and boost loyalty. But on the other hand, an added responsibility of staying connected with customer personas comes along with value-based pricing.
Therefore, it is essential for you to make sure that you are in tune with your customers when following a value-based strategy.
Pricing Strategy No: 10 ==> Geographic Pricing
By using a geographic pricing strategy, companies price their products according to the geographical location of customers.
Having this pricing strategy implemented means that the prices of products may vary with the geographic areas. The companies make pricing decisions based on the disparities of different locations.
So if you have ever seen a difference in the price based on location, you have witnessed geographic pricing in action!
Finding the right pricing strategy will not be a piece of cake. If you are starting out fresh, we will recommend you understand the type of market you are dealing in and the demographics you are targeting.
If you understand the nitty-gritty of your business, you can combine the strategies mentioned above. And come up with a perfect solution for your pricing conundrum.
We hope that the pricing strategies mentioned in this blog have served your purpose. So what are you waiting for? It’s time for you to deal with your pricing problem by implementing the right strategy. Make your move!
Do you want to read more? Check out this blog: