In today’s dynamic and fiercely competitive business landscape, pricing stands out as one of the most influential factors shaping consumers’ purchasing decisions, especially during the current cost-of-living crisis. Not only does the price of a product directly affect its accessibility, but it also often serves as a quality indicator, with many individuals associating higher prices with superior performance.
Businesses can strategically harness these consumer perceptions by aligning their prices with their desired brand image and customer expectations. Consequently, the price model you choose can exert a substantial influence on your business’s profitability, market positioning, and overall growth trajectory, transforming your goals from ideas into concrete realities.
Developing the best business strategy for your business is no walk in the park. A business’ success is greatly dependent on factoring in an array of different financial aspects. And it doesn’t just boil down to pricing. It’s also good to take heed of advice from those who have an abundance of experience, like Editor-in-Chief at NoDepositFriend, Steven Ellis:
‘First and foremost, ensuring that there’s a good pricing strategy allows you to properly allocate a budget towards foreseeable expenses. But, it also leaves space for possible unforeseeable costs, which are often overlooked. Yet, when all’s said and done, having the right pricing strategy in place enables you to monetize on what your brand is all about. Indeed, having a great product or service should be your number one priority. However, without a proper pricing forecast, the probability that all other efforts and energies invested would lost is high.’
Explore our pricing strategy guide, equipping you with the tools to stay ahead of the competition in today’s rapidly evolving market.
Define Your Business Objectives
Before you can simply slap a price tag on your product, you need to clearly define your business objectives, as this will enable you to make more informed decisions. Think of your business objectives as an invaluable roadmap that outlines where you want your company to go and how it will get there. It might be helpful to revisit your business’s original vision and mission statements to gauge where you aspire to be in the future.
Conducting a SWOT analysis is also beneficial, as it allows you to understand your internal and external environment, helping you set realistic goals. This analysis will also assist in positioning your product in the market. Launching a never-before-seen product that fills a gap in the market is one thing, but introducing an improved everyday product is another. While both scenarios require educational campaigns to convey their value, consumers can easily compare a reimagined everyday product with something they’ve been using for years. This may pose a bigger challenge, especially when justifying the price.
Assess The Competition
It’s no secret that consumers are overwhelmed with choices on a daily basis, and convincing them to abandon their tried-and-true products in favor of something unknown is no easy feat. However, price plays a significant role in this endeavor. Therefore, your pricing strategy cannot be conjured out of thin air; you need to assess the market context and determine where your product will fit, especially if you intend to make it available in large retail outlets.
Start by curating a list of companies or products that offer your target audience similar solutions. For here, studying their products in detail, taking into account their features, quality, and any unique selling points. We also suggest looking up product reviews to see what consumers like about the product and what they think needs to be improved. Next, you will do an in-depth dive into their price strategies and see whether they position themselves as budget, mid-range, or premium offerings, as this helps determine where your product will sit.
Determine Your Target Audience
Your pricing model and promotional campaigns must align with why your target customers need your product. Suppose your product provides an effective solution to a common problem. In that case, value-based pricing may be the best strategy for you. Whereas, if your product is simply a cheaper alternative to what is already available in the market, then competitive pricing, a strategy employed by low-cost airlines, is the way to go.
Moreover, suppose your product targets a broad audience. In that case, it’s essential to price it accordingly and select a retail outlet with a wide customer base such as supermarket juggernaut Walmart, to maximize its visibility. In the case of food products, product sampling can be a highly effective method for allowing consumers to try out the product before making a purchase, letting the taste speak for itself. While more premium products, such as designer clothes or luxury vehicles, are available in exclusive outlets.
Developing the right pricing strategy can seem very overwhelming at first and could involve some trial and error as you navigate the ups and downs of running a business. It’s always important to remember that there will always be factors beyond our control that may impact consumers’ purchasing decisions, so simply focus on providing a great product with an appropriate price tag to match.