Pricing has a decisive impact on a company's profitability. A price that is too high risks driving away customers, while a price that is too low risks jeopardizing the survival of the company. In addition, the price sends a message about the quality of the product or service and helps stimulate demand by offering a temporary price drop as a promotional strategy.
Too high a price can significantly reduce sales volume and disappoint customers if the value and quality of the product or service is not met.
Too low a price may attract a lot of customers, but the buyer may doubt the quality of the product or service. In addition, if you want to increase the price later, customers will be reluctant. The skimming strategy based on low prices is used to enter a market. It must take into account the competition, the overall price and the profit margin.
The pricing strategy must be consistent with the reality of your market. It is closely linked to the positioning of the company, which depends on the target clientele. Are we looking for an affluent clientele or an average buyer? Do we want to offer a personalized or mass product or service. The greater the buyer's requirements, the more specific or adapted the product or service will be and the higher the prices may be, taking into account the buyer's ability to pay.
skimming policy
It's about setting a higher price that you adjust over time. This strategy can promote a high-end image of your product or service. Additionally, you might want to set the highest possible price in order to get more revenue from the launch of your product or service. Make sure, however, that the clientele is ready to pay, because competitors will react quickly.
The market penetration policy
In this case, it is a question of establishing a lower price than the competitors in order to seek market share more quickly. If the product is commonly used and the objective is to reach a large market in order to share the profit. Setting a lower price should quickly reach a good volume of customers. Be sure to be vigilant, as too low a price risks projecting a poor quality image associated with your product. Also, make sure the competition doesn't have the ability to enter into a price war with you.
The politics of competition
This pricing policy consists of setting a price based on current prices. You simply have to select competitors who offer a price similar to yours and set your price accordingly.
The pricing policy based on the global price
This pricing policy consists of grouping together products or services, and setting an overall price for the whole. In this way, the value perceived by the customer is increased and, consequently, the price is also.
Pricing policy to generate a profit margin
Calculate your costs and then add a profit margin.
The pricing method
The pricing method allows for more objective pricing. It avoids making costly mistakes that will be difficult to correct later.
- Cost-based pricing
- Pricing according to consumers
- Pricing according to competition
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