Pricing is an important part of your marketing mix strategies. Pricing can help or hinder your product or service sales. Given that your product is good quality, that it has the features and benefits that your buyers want and need, that it is differentiated from your competition, and that it has a good cost structure and a good, strong promotion and distribution program, your pricing strategy for your product or service can help you sell it, or not. Pricing strategies can have a very direct impact on growing your market share.
Four alternative pricing strategiess for your business are:
- Generic or economy pricing. This strategy treats generic or economy-type brands with a low price – the value to the buyer is in the low price. Your business approach to this pricing strategy must be rooted in a low cost structure, minimal features, minimal promotion but still solid (not extravagant) benefits.
- Differential Pricing. With this strategy, you might choose to price your product differently by buyer type (e.g. retail store, online store, a department store), by geographic region (e.g. the California market might be higher priced than Illinois), by volume purchased (e.g. a customer buying a large volume would receive a different price than one buying a small volume), by national account segment (e.g. you might negotiate special differential pricing with a national account versus the price you would charge to a local account). With all of these differential prices, there must be a justifiable reason for the price differences.
- Premium Pricing. This strategy is commonly used for luxury items or high end, high value goods, such as expensive jewellery, boats, planes, estates, etc. Only use this strategy if your product’s value is recognized by your market as being a premium or luxury good.
- Captive Product or Companion Product Pricing. This pricing strategy is also used in product line pricing. This strategy bundles, and usually packages, like products together to be priced as companions (for example, a mixer and a mixing bowl) and as captives (for example, pens that have to have a specific refill (not generic), razors that can only use a specific blade, etc.). Captive or Companion product pricing often relies on packaging to offer the two products in one package (for example, a trial pack of blades with the razor; one pen refill packaged with the pen; or the tape refill with the tape dispenser). Then when those blades, refills or other companion products are used, the price to buy new blades, refills or other products is significantly higher than the original priced package.
Thoroughly analyze your product, your buyers, your competitors (and their possible actions and reactions), and your market before you decide which pricing strategy would best-fit your business. Then review pricing strategy by product, and by product line, on a regular basis to make sure that the fit remains the best.