The price you charge for your products or services is a very important component of your strategic marketing as it determines your profitability and chances of survival. Adjusting the price of the product has a big impact on the entire marketing strategy as well as greatly affecting the sales and demand of the product. Pricing always helps shape the perception of your product in prospects’ or customers’ eyes. Set the price too high and they see the costs outweighing the benefits. Set them too low and they will assume your product or service is low quality and value. It is important to examine competitors’ pricing and price accordingly. When setting the product price, you must consider the perceived value that the product offers. There are many pricing strategies but the 3 major one are:

• Market penetration pricing

  This is where you offer incentive discounts to increase sales and market share. Once market share has been captured you then increase price by ending or reducing the discounting.

• Market skimming pricing

  Skimming is the process of setting high prices based on value. Here you set an initial high price and then slowly lower the price to make the product available to a wider market. The objective is to skim profits of the market layer by layer.

• Neutral pricing

  This is where the prices are set by the general market, with your prices just at your competitors’ prices. The major drawback here is that your company is not maximizing its profits by basing price only on the market. Essentially, neutral pricing is the safe way to the play the pricing game but not rapidly gain market share.

Here are some of the important questions that you should ask yourself when building your pricing model:

• How much does it cost you to produce the product or deliver the service?
• What is the customers’ perceived product value?
• Would a slight price decrease significantly increase your market share?
• Could a slight price increase lose a small number of customers but generate a greater profit overall?

Changing your terms and conditions of sale can often have a positive impact on sales and profitability. Also, bundling or combining products and services together with special offers and special promotions can make your prices appear far more attractive to your customers. You always need to be open to the possibility that your current pricing structure is not ideal for the current market. Be prepared to revise your prices, if necessary, to remain competitive, to survive and thrive in a fast-changing marketplace.

Ideas for how we might help...

• We could carry out a competitive analysis and build an impartial view of how the prices for your products or services compares with those of your competitors.
• We could capture the features and benefits delivered by your competitors and speak to your target market to find out they value these benefits.
• We could review your costs of sale and see if they can be trimmed to maximise your margins.
• We could help you refine your pricing strategy and perhaps adapt the product or service to drive growth, increase penetration and maximise profit.
• We could help you access grant support to help fund our market research, analysis and strategy review.

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