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Pricing Methods for a Sturdy Backside Line

A pricing strategy is as important as what you have to sell. Finally, they determine what you charge for the goods and services that you have in the market. Ultimately, it's a balancing act to get these pricing strategies right. You need to find that sweet spot between market demand and maximum profit.

You must consider the following to put together a good strategic pricing model.

What is pricing?

Pricing is what you charge for what you sell. Sounds easy, but there's a little more to it than you think. Any small business that wants to do this right must have a plan. Remember, finding the sweet spot is much more than just figuring out what customers are willing to pay at a given time. Good pricing strategies are sustainable and flexible.

Why is pricing important?

Pricing is important because it is an important factor in a customer's purchase decision. In short, when pricing, the value of your sales is converted to cash. Pricing strategies help you to open up your target market. A low price can get you out of business if you don't meet your overhead. A high price that goes too far in the other direction can keep you from your market.

Pricing Strategies

You need good pricing strategies as well as a good business plan. Every small business needs to understand what it can ask for products and services. These strategies provide a road map that you need to follow when pricing. If you follow one of these strategies, you can even know when to charge a higher price. In short, they help you determine the value of what you need to sell.

1. Competition-based pricing strategy

If you sell similar things, this is the pricing strategy that your small business should follow. How competitive pricing works First of all, this works best for products and not for services. It works when the price of these products has reached a point of equilibrium between your company and others.

This pricing strategy begins with the use of the market price to set a price.

The idea is to be able to ask for a premium price to get ahead. To get this high price, you have to be innovative. Generous payment terms and additional functions are just two ways to secure a larger market share.

The competitive pricing strategy begins with a price based on what the competition has set. Suppose you sell new software for $ 50 a month for a monthly subscription. So that's the next guy. They add an online customer service and charge $ 60 a month.

2. Value-based pricing

Basically, this is pricing based on customers' willingness to pay.

This pricing model consists of several steps. You need to do some detective work here to find a competitive product. Next, you need to list all the differences between your product. Emphasize the financial value of these differences. This is a reasonable way to defend your pricing strategy.

Here's a tip if you're thinking about value-based pricing. This is not a one-off pricing strategy. It is a process that you need to optimize further over time. Here is an example.

Value-based pricing works well in service industries like a restaurant. You can compare with a competitor's menu and add ingredients to justify the higher price. Ask your marketing department to defend the price difference.

Value-based pricing is based on what you can get customers to value.

3. Penetration Pricing Strategies

If you are a company looking to enter a new market, penetration pricing is right for you. How this pricing strategy works It is really simple. Your company enters the new market at a low price. And then you increase the prices over time. The penetration prices are based on customer loyalty. This pricing strategy is based on the value you have placed on your goods and services. And the hope that customers will stay with you when prices go up.

4. Premium pricing strategies

This is the best pricing strategy for high-end or luxury items. A company must have a solid brand for this to work. The perceived value is important for premium pricing.

Look at the prices for SAAS products. Offering different premium prices from basic to enterprise and unlimited versions is a good example of how this works.

Pricing for a Product or Service

Whether you use premium pricing, value-based pricing, or another version of pricing, depends on a few factors. By now you know that pricing isn't as easy as you might have thought. There is no uniform pricing strategy for your company.

Below you will find some price tips to help you get started.

Price Tips

Here are some tips to get you up and running. Remember that you can adapt them to your business model and style.

1. Don't go too low in price

Christopher Grozdon is CMO at DASH-SEO. It warns against underestimating your services or goods.

"If you get prices too low, it is ultimately a race to the bottom and you tend to attract lower quality customers." As a business owner, almost every cheaper customer we had was always a lot more demanding than the higher priced customers. "

2. Be patient pricing

To make maximum profits, you need to understand the market when setting prices.

Brian Robben, the CEO of Robben Media, explains a point of view.

If you have new prices released, you should consider increasing them in six or twelve months if there is no pushback. ", He says. "With enough price tests, you will find the right balance to be successful as a company and offer your customers added value."

3. Know Your Market

Pricing is a journey. It is important to take the right steps to get exactly what you are asking for your product. Don't forget to do your homework.

"When it comes to online and offline pricing, it's important to study consumer behavior," said John Davis, education ambassador for Score Sense. "For example, if you sell artisanal products, customers may be more likely to buy online in bulk, but if you’re dealing with something that requires more valuation in advance, such as a piece of furniture, you may want to adjust store prices so that they are lower than online to encourage visitors. "

For more information, see the following section.

Questions and Answers on Pricing

There are some common questions about pricing a product or service. Below are some of the most important ones regarding value and prices.

Should I use psychological prices?

As the name suggests, psychological pricing is about using psychology for sale. In short, it is about optimizing the product price based on the known functions. Setting the price below an integer is one of the tactics used. This is an effective way to set a price at short notice

A recent Stripe report found that simple pricing with .00 or .99 can have a significant impact on your customers' buying decisions.

  • When it comes to buying products, new customers make more purchases overall, ending with a 9 for items that cost less than $ 10. However, Stripe says it also extends to items that cost $ 700, 800, or $ 900.
  • Evidence of this practice has led to higher consumer purchases for items ranging from $ 0.99 to hundreds of dollars.

To learn more, read: Psychological pricing online helps retailers sell more, study results

Is the pricing of an online product or service different from offline pricing?

Here are a few things to consider when evaluating your product and service for online or physical sales.

  • Loss leaders are not as effective online: loss leaders or products that are sold with little or no profit margin to attract buyers are popular in brick-and-mortar stores. However, since selling online can be faster and more direct, this strategy is not always effective. So you should be very careful when discounting a product or offering a product with low profit margins.
  • Your policies can affect your prices: Another thing that can affect customers' willingness to pay is your policies for returns, exchanges, and mix-ups. If customers know they have the option to return a product that doesn't fit or doesn't work, they're likely to pay a little more than in a location that doesn't offer returns or covers them in the event of shipping issues.
  • Your products and services are online in one place. Pricing a product online is easier because there is generally a price because there is a location. If you have several stationary shops, your product may have different prices depending on the point of sale.
  • Multi-channel makes a difference. Multichannel retailers often try to match the product prices they find at online giants like Amazon. These strategies create a wedge from the price they charge in a physical store for the same product.
  • Product costs vary online . When you set a price for your product, there are some similarities between online and offline. And there are differences. For example, if you use value-based pricing on the Internet, your shipping costs and marketing budget will be much lower. This gives you more scope with the price.

To learn more, read: 20 Secrets to Best Ecommerce Pricing

How do I know when a price is right?

If you sell services directly, a measure is the buyer's reaction:

  • I If the interested party immediately rejects the offer, they consider the price too high, which means that you have not sold the advantages of your company.
  • If the interested party accepts the offer immediately, you have given away too much value for a price that is too low; Your prospect seems to have discovered a Van Gogh original at a flea market!
  • You know that you did it right if your prospect only accepts your offer after some consideration. In this case, he knows the value that he loses if he says no.

If you have a product that you sell in a B2B environment, here are some tips you can use.

  • When you sell to another company, you know the price is right if you never stop working on it. The input of the marketing and product development departments must be constant.
  • You will know that the price is right if the technician tells you. Today, companies can use algorithms based on analysis. Check out these price analysis tools.
  • You will know that the price is only right after you have done your homework. In a B2B environment, this means putting together a customer profile. Remember that customers are more price-conscious than smaller ones. It is also helpful to know which phase of the business cycle your potential customers are in. Do not leave out any details. Dealing with businesses means adding customer support to your price. This is the kind of extra bonus that can improve your bottom line.

To learn more, read: How to tell if your prices are right


Regardless of whether you rate a product for a service, a well-considered, well-planned approach is best. One of the best things you can do is find out your target market first. If you know what that population looks like, you can make some other decisions.

Note that the correct pricing of your goods and services is not a static process. The most successful companies are constantly optimizing their approach. Pricing is important as it helps define the value of what you are selling. For many companies, this is one of the most important aspects of their work.

Along with what you actually sell, determining your price points is the most important feature. Finally, keep in mind that the right pricing strategies are a struggle that also depends on business cycles. If you consider all of these factors, you can do it right.


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