Criteria for Setting the Right Price: Harnessing the Marketing Mix
Although no business has a chance of achieving any type of excellence without paying considerable attention to price, product, promotion, and place, known as the 4ps of marketing.
Although product, promotion, and place are important, the most significant element of the marketing mix is pricing. The ability to set the right price will be the lifeblood of your business in terms of longevity, growth and customer satisfaction. Risk setting the wrong price and your sales will plummet almost overnight.
Keeping up with the competition, increasing market share and winning the hearts of customers require a business owner to be passionate and skillful in implementing the pricing aspect of the marketing mix.
Both overprices and underprices can negatively affect the quality and growth of a business. For example, when a product is priced too low, a perception of low quality will most likely loom in the back of consumers' minds, but if a product is overpriced, customers will most likely turn toward the competition for satisfaction. Therefore, pricing must be very high on a company's priority list when it comes to persuading customers to buy.
Several strategies exist for setting the right place, including
Premium pricing occurs when a company introduces a highly-distinguished product or service into the market place. Uniqueness is the key. Competitors are unable to match or duplicate the unique features of the item.
When a business uses premium pricing, it is attempting to make the greatest revenue in the shortest period. Sooner or later, the new product or service will be duplicating by competitors and offered at a lower price.
When a company enters the market with the lowest price possible, it is attempting to outwit the competition and gain a greater share of the marketplace. Initially, a company may suffer a temporary loss, but in the long run, as popularity grows, the company will be rewarded with more revenue than it lost to attract customers
Making Intelligent Pricing Decisions
Is getting the price right a major priority for your business?
Price sensitive individuals are targets for economy pricing. This type of pricing is designed to reach a segment of the marketplace. Popular organizations, including Walmart, Target, Dollar Tree, and Audi food stores use a low -price approach to marketing their products and services.
Economy pricing has been one of the most successful pricing strategies since most consumers look to save money but also desire decent goods and services.
Considerations for setting the Right Price
To get the price right a business must ask several questions, including
What prices are my competitors charging for related items? If your competitor is charging $60.00 dollars for a pair of fashionable boots like your brand, you could charge a lower price to pull customers from your competitor.
What is the state of the economy? Unless you are a popular brand, setting a high price in a weak economy is business suicide. For example, in the recession of 2008, thousands of stores reduced their prices because consumers were experiencing hard times. As a result of reduced pricing, consumers were able to stock up on goods.
What is unique about my product or service? If your product is highly distinguished and in demand, and have few rivals in the marketplace, you may get away with charging a higher price. For example, in 2008, when most organization where reducing prices, Tiffany and Co., an iconic diamond organization enjoyed selling its name brand diamonds at the same cost. As a result, sell remained steady without the slightest decline.
An exceedingly popular name brand can still survive due to its unduplicable uniqueness compared to other lesser brands. This is premium pricing at its best.
The bottom line
The success or failure of a company depends on how well it manages the business of pricing. Before a business launch a new product or service, it should do a thorough research of the market, the audience, and the competition. Only then will the company be able to make a quality decision about getting the price right.