Undoubtedly, how to price a product is one of the most confusing issues for entrepreneurs around the world. There are many people who question whether they really charge the right price depending on the product or service they offer. Most of them set a value without a detailed analysis of the benefits of the product.
It is normal, then, that in this sense a lot of questions appear. It is important to understand that prices are one of the keys to consolidate your business over time and become profitable. Pricing is responsible for generating competition and is one of the ways in which entrepreneurs attract customers; in addition, it has a direct impact on the financial health of your business.
Making a change in the value of your products, no matter how small, directly influences the financial health of your business. That’s why we invite you to read on and discover different types of pricing strategies to make your business as profitable as you’ve always wanted it to be.
Table of Contents
Types of pricing strategies
According to the value it brings to the customer
As its title says, this strategy seeks to define prices according to the value you bring to customers. This may seem somewhat difficult to qualify; however, we must understand that one thing is the value that we attribute to the product and another is the value that the customer gives it. The latter is usually higher than the real price, although sometimes it does not correspond to the real price that is being charged. That is why it is an advantage to be able to set prices depending on the type of customer.
It is very important, in this way, to know the market where we move. Only in this way, our product will bring the maximum value to customers, all within the price margins established by the viability and profitability of the company.
According to company costs
One of the most common approaches used by different companies when setting prices is to analyze the company’s situation to determine the profit margins to be achieved. Depending on the fixed and variable costs, a percentage is applied to the price of the products or services being offered.
Although we must bear in mind that this strategy involves a difficulty, and that is that it does not take into account, or not necessarily, the final consumer or the competition. In this sense, it will only look at the viability of the project. For that reason, we must be careful and weigh all the key aspects before making a decision.
According to the competition
One of the most commonly used pricing strategies is to focus on the competition. In this sense, everything will depend on the strategy you want to adopt, and the results will depend on it. For example, setting prices lower than your competition seeks to penetrate the market in a forceful way, this is usually done by new companies that want to achieve a good share.
On the other hand, you can choose to match prices, this is usually done to not generate losses and because customers are usually accustomed to a certain value and lower or raise it can mean a detriment to the company. Finally, some businesses set prices higher than the competition so that the product is perceived to be of higher quality and to achieve a certain market share.