Pricing strategy is among the most critical factors affecting our revenue and profit margins while selling products.
Businesses use various pricing strategies when selling products to maximize profitability, make market entry, increasing market shares and face the cutting edge of similar competitive products.
Among the long list of pricing management, Saidhem finds that three strategies are used mainly by our clients that fit their market at each level of decision in their business.
- Competitive pricing strategy
- Cost-plus pricing strategy
- Value-based pricing strategy
We briefly examine each of them and see how you can use these elements to launch and sell your product strategically.
Competitive Pricing Strategy
Competitive pricing is an effective way to help business setting an offer price which is in line with their peers to maximize the revenue. As a result, the company prevents competitors from entering and occupying the market longer.
However, companies need to consider factors before setting the price, such as market maturity, market-based price, and consumer price sensitivity. Mainly to ensure a sustainable profit to contribute to company overhead costs, as businesses may miss the opportunity to make more profit or get caught up in the price race.
Cost-plus Pricing strategy
A business that does not involve market research or already has a pool of faithful customers finds a cost-plus strategy the best suit. It is the simplest method of determining price with a good style of selling the product more than it costs.
A fixed profit margin adds to the product’s total cost price, which becomes the selling price in this strategy. For example, cost of a product from factory + transportation+ labour fees+ warehousing X A% = selling price, and that’s it. And in this kind of pricing, many aspects are neglected, which may hinder the long term due to holding costs of products and perishable goods that should always be under double surveillance.
Value-based pricing strategy
Nowadays, as may we pay attention, price is becoming a numerical evaluation of how much customers value what you are selling.
In a value-based pricing strategy, we first need to find what our niche market expects from our product based on the consumer’s habits and purchasing power.
For example, A consumer wants to buy an electrical extension socket, he/she may get in a hardware shop and buy anything that can fulfil the job. Still, most of the consumer nowadays will try to find a more relevant product that can assist multi-usage, surge-protection, universal socket all in one. And this can bring forward the value-based pricing strategy. As a seller, we learn that the product value in terms of consumer demand creates an opportunity to value our product.
Since a value-based pricing strategy is a marketing component and a science in itself, Saidhem helps our client figure out the latest product with all new features that can accelerate this pricing strategy without searching for the new features in the old product. We communicate products with all features that can help our buyers stay in the know, which may help them quickly market their end-users and win the business.
How can a Value-based pricing strategy bring your business to the next level?
- It helps to enhance your product quality
- To yield higher profit
- Keeping you ahead of competitors old products
- It allows you to provide a higher customer service
- Create a more heightened brand awareness
Feel free to discuss with us how you want to project your next idea about your market.