Pricing strategy is one of the most effective factors in the success rate of product sales and customer satisfaction.Pricing means determining the value of goods and services that can be offered, which includes various factors. Factors such as production cost, cost of raw materials, labor, time and such things.
In addition, the pricing strategy is very important because it determines the target customer, the advertising rate, and the way the product is distributed. A point that should be taken into account in relation to pricing strategy is compliance with relevant principles such as competition and existing laws in this field.
The Importance and Application of Pricing
In today’s ever-changing market, along with the changes that occur in products, markets and competitive activities, marketing strategies must also change. On the other hand, the price factor is also one of the constituent elements of the marketing strategy and process. Therefore, this factor should change along with marketing changes and we should not consider it as a separate factor.
The price is the only factor of generating income and should be coordinated with other internal mechanisms. Pricing too low leads to loss of profit and pricing too high leads to loss of sales. For this reason, unprincipled pricing may have destructive effects on profitability. Despite the importance and impact that price has on sales, proper attention and action have not been taken to determine pricing strategies throughout the product life cycle.
Features of a Strong Pricing Strategy
1. Expressing Brand Value
Considering a low price for products by default is associated with the idea that we are dealing with a low-quality product. Usually, customers consider cheap goods as low-quality as goods. On the other hand, they believe that the goods that have a higher price also benefit from a higher quality.
2. Persuading Customers to Buy
Although a high price can indicate a product’s higher quality and value, if that price is more than what a potential customer is actually willing to pay for it, then quality is meaningless. On the other hand, as mentioned, the low price may introduce the product as low quality and worthless, and the customer will stop buying. The ideal price is the price that ensures and convinces the customer to choose our product from among the similar products of competitors.
3. Gaining Customer Trust
A very high price and a very low price can cause misunderstanding for the customer. Because there is always a default in the customer’s mind regarding the price and its reason. So we should try to gain customer trust by setting a reasonable price.
Objectives of the Pricing Strategy
1. Financial goals of the company.
2. Establishing compatibility with the conditions and realities governing the market
3. Maintaining the position of the product in the market while matching and harmonizing the price with other elements in marketing
4. Maintaining price stability
5. Creating healthy and effective competition and preventing negative competition
Pricing Strategy Methods
1. Customer-based Pricing
This strategy is used where we pursue 3 goals:
a. Maximize the number of customers
b. Creating opportunities for more sales
c. Understanding the different aspects of the customer’s ability to pay
2. Value-based Pricing
In this type of strategy, we face two situations:
a. The company or manufacturer tries to show the market value by relying on the price.
b. The company or manufacturer tries to bring the price of the product closer to the value in the mind of the target customer.
3. Community-Based Pricing
This strategy is used where the purpose of determining the price is to encourage the purchase or prevent and discourage the purchase by the society. For example, high pricing for cigarettes in order to reduce their use.
4. Relationship-Based Pricing
This type of pricing is done by the marketer to create effective relationships with current or potential customers.
Up To Sum
In general, it can be said that the task of the pricing strategy is to achieve an efficient price. It means to establish a price that balances between the price floor, which means the price below which the company will lose, and the ceiling, which means the price above which the consumer is not willing to pay. This strategy should include logical reasons to convince the customer to buy and be a good spokesperson to express the brand value. In the field of pricing, we are not faced with a single method. Rather, we can use different methods according to the market situation and product variety.