Hello, I’m Jim Glover, That Branding Guy, for Once a Day Marketing. Today we are going to dive deeper into one of the 7Ps of Marketing: Price. There are great pricing strategies you can leverage to better penetrate the market or make more profit.
Today and tomorrow I will be sharing eight different pricing strategies. Choosing the correct one(s) is dependent on your goals. Do you want to distribute your product in the marketplace quickly or are you establishing a position in the marketplace as a very high-end product that commands a higher price. These are factor that you will have to take into consideration.
Pricing is driven by supply and demand. Are there a lot of the widgets out there or not very many? How unique is your product? Are customers clamoring for your product or can they find something very similar right next door? Also be attuned to what your competition is doing.
The first pricing strategy is called penetration. Very low pricing is established to push product into the marketplace quickly. Margins will be low, however, this strategy should drive increased volume.
Next is skimming. A higher price is set at product launch to capture dollars from early adopters (consumers who want a product when it firsts comes out). You are able to charge this customer a higher price because they will pay the premium to be the first ones on the block to get a new/upgraded product. After you’ve exhausted early adopters you can offer a slightly lower price and then another customer tier will come in, and then another lower price and another tier will come in. Keep reducing the price until you have your entire target market in the channel buying your product.
For competition pricing you decide if you want to be lower than your competition, the same as your competition or higher than your competition. Consider gas prices. When you’re at an intersection typically all of those gas stations have the same price. A station across town may have a lower price because they are trying to attract customer. Perhaps another station offers more service so their gas may be priced higher.
Lastly we will discuss product line strategy where you offer a variety of products each at a different price point. Customers on a budget may buy the entry-level product. Then there are middle and higher price tiers. You are essentially offering an ala carte menu to your customers so they can choose which product they want to buy given the benefits and the budget they have available.
There are various approaches you can take with pricing. The scientific approach is called price elasticity, determining what a marginal change in price will do with respect to how much of your product people will buy and the related profit. On the other side is the psychology of pricing, which has no bearing on what the cost of the product is. It’s all about what you think the market will bear with respect to your product. You as the marketer have to determine the best pricing approach to take.
Tomorrow we’re going to talk about four more pricing strategies.
Thanks for watching. Please join us tomorrow for Action Wednesday. If you need branding support, please contact me to discuss an online or face to face service engagement. That information can be found at the end of this video. I’m Jim Glover, That Branding Guy, for Once a Day Marketing and we’ll see you next time.