Customers will think carefully before purchasing a product. In fact, the average consumer tends to research and compare products online first before deciding where to shop, with the price tag often a primary motivation behind a sale.
Pricing tactics can be one of the hardest things for merchants, How much to charge? How much is too much? Am I selling myself short?
Whether you’re selling products from a supplier or your own unique creations, deciding how much to charge can be tricky at best. That is why we decided to create this article to give you the best tactics for your product.
Expensive pricing Tactic
Generally, people usually have a pretty good idea what is cheap and what is expensive. So if you’re going for expensive pricing, your product has to feel expensive. The goal is to increase its perceived value.
Things that drive up the perceived value of a product:
· Packaging & Design: Every high priced item you buy comes in a fancy box. Your product has to “look” expensive.
· Format: Product differentiation! Don’t be like most products in your category. Repackage it into a different format, one that no-one else is using.
· Uniqueness: Expensive products have to be one of a kind — the only one that does what it does. If your product has no unique differentiating characteristics in a crowded market, you really cannot charge more than the market average.
· Availability: You can charge a higher price if you have a very limited quantity.
If all these four points are met, choosing an expensive pricing strategy can be very profitable.
Cheap Pricing Tactic
Note: if your product is not unique, you are always going to compete on price. If there are no significant differences between your products and competing products, people will choose based on price. That can work to your advantage.
The best pricing tactic in a competitive market is doing it cheaper than others. People like to get stuff cheap. Now, cheap product pricing does not necessarily mean that you have to be the cheapest in the market. Testing a higher-than-average price for your product is a good thing to do.
If you test a higher price and it brings in the same number of responses as the lower price, you immediately increase your profits.
Generally higher price should reduce the number of sales. The theory of market elasticity says that the number of sales will go down when the price goes up, and vice versa. The question is: by how much? If it’s just a modest decrease, you will do better at a higher price because you will generate more profit and possibly bring in higher-quality clients that will spend more money later.
If you make the price too high, your sales will drop precipitously to a point where you are bringing in too few new customers to maintain cash flow. This is usually easy to notice and fix.
When you enter an existing market with a product that is not significantly different or better than the competitive products, the market experience is that you usually find more success when selling the product at a discount.
When there is an established price for the same type of products then it is easy for the customers to figure out what the average price is. If you can sell at a significantly cheaper price, you can sometimes enjoy a very strong response.
The only question you need to answer is whether you can afford to run your business like that.
The Optimum Pricing Tactic
Before you set your price, you have to gain some insight into how much room you have to maneuver. A good way to start is to get a clear overview of your costs.
The price you charge for your product has a major impact on sales. Choosing the price, like choosing the media or the product, is fairly easy to do. Start by finding out what the competition is doing.
To be successful you will need to find this optimal selling price: a price at which the selling campaign will yield the greatest profits. This optimal price can change during the life cycle of the product — being higher when the product is hot, for example — but it is always important to know. If you deviate from it significantly, you will reduce profits or even create losses where profits should have been.
Even after you have decided on the tactics you want to use, here are tips to keep in mind:
· Better to charge more than less. A higher price increases the perceived quality of your product. If your price starts on the low side, you’ll meet more resistance from your customers as you try to increase your price than when your product is a little overpriced.
· If you are a small business don’t compete solely on price. In a price fight, larger competitors with deeper pockets and lower operational costs wipe you off the field.
· When possible and your product is expensive, offer installments or financing. Many people are short on cash so offering them a special deal can work wonders to motivate sales.
Implementing a competent pricing tactic for your business can be the difference between more prospects and more customers. There is no one-size-fits-all strategy for pricing a product or service. It all depends on the nature of your target market, the competition and the kind of customers in that market. You have to apply the tactics in this article until you find a price point that works best for you.
Attach the right price tag to your product and you’ll have a bigger chance of convincing your customer to buy from you, giving your business a solid foundation for success.
We’d love to hear from you. Which of the pricing tactics resonates best with you?