A Pricing Strategy is a method used to establish the best price for a product or service. It helps you choose prices to maximize profits, revenue and shareholder value while considering consumer and market demand.
Economic value and price & Value communication
The importance of understanding the economic value of your product when it comes to pricing.
It is important to understand the role of economic value in pricing decisions. Pricing can really influence when consumers purchase a product. It is important to a purchaser and to the seller as well, low prices can have the effect of creating higher demand but consumers sometimes fear the quality of a product, that's why some consumers buy a product even if it has a higher price but worth the value itself.
What benefit does your business or firms could have if you were able to communicate to the economic value of your product to your customer well?
If we are able to communicate to our valued customers the benefits that we can get is that we can protect our value proposition from competitive encroachment, their willingness to pay and also we can increase the likelihood of purchase as customers move through their buying process.
Price Structure
Segmented Pricing and the probable mechanism
One of the challenges that undermine segmented pricing are the Gray market sales. Gray market is the selling of goods and services at discounted prices through channel intermediaries that are not franchised by the manufacturer. The example of this is the parallel importation,when the product is priced lower than in the home market, a gray market can take advantage of the price difference by importing from the country of production to the export market. To limit the gray market activities we should implement the economic measures. If the manufacturer can limit the amount of product going to each distributor it may be able to prevent some gray market activities. And also by implementing the Centralization, centralized pricing policies will give manufacturers improved ability to control the prices in neighboring markets. With the solution given I can tell that by implementing those solutions we can limit the gray market sales.
Three Mechanisms to form a Segmented Price Structure.
Price offer configurations - this is when you sell your products/services in a bundle in a different feature based on the differences in their preference.
Price metrics - this is the basis for tracking the value customers receive and how they pay for it. Metrics makes your pricing appear in comparison with competitors pricing and the impact of that in the attractiveness of your offer.
Price fences - this is the policies, rules and structures that customers must follow to qualify the price discounts or rewards.
Pricing Policy
Benefits can your business/firms have if you were able to prepare and implement good pricing policies.
Generally, pricing policy refers on how a company sets the prices of its product and services based on cost, value, demand and competition. Through systematic pricing policies, many companies can reap greater profits and increase their market shares. The advantage of it is, it lies in its ability to make the product appealing to customers, while also covering the cost. Setting the price after considering the prices of comparable products, using the product or services to send a message about your offerings either it has a better value or higher quality.
Price Level and Price Competition
Negative effects on the industry you belong and to your own business/firms if you/your company are pricing your product too low.
In my own understanding, pricing your product too low can have a negative effect. It can affect the volume of sales up and down. Lower prices are also misleading, the customer perceptions of a low price depends on what they think about when making the decisions to buy a product because they push the idea of an inferior brand onto the prospects. Setting prices too low can convey the message to consumers that your product isn’t good as other similar products on the market, and also low pricing may not generate a great enough profit to cover costs, especially if the sales volume is down.
Non-price mechanism in connection with the issue of “fairness”.
Non price rationing of goods normally rationed by price is also commonly imposed by governments. Many goods and services are allocated among demanders by criteria other than willingness to pay or by a mixture of price and non-price rationing. Here are some of the motives of the government’s aim in opting for non-price, it is because to shift the burden of adjustment to the scarcity of some goods, to suppress the symptoms of inflation and to respond to perceived demand from the electorate that the government does something positive in a crisis situation. With that motives, we can say that is fair enough for the customers and businesses.
The importance/benefits of thinking thoughtfully when it comes to reacting to price competition.
Managing price competition becomes more challenging, and unnecessary gap in profitability becomes much more likely when a firm’s market share is large enough that competitors react to its decisions that is why it is very important to think thoughtfully when it comes to reacting to a price competition
Pricing your product strategically based on the 6 key elements of Strategic Pricing.
Pricing is one of the 4Ps in marketing, and how you price your product or services doesn’t impact your profitability but it impacts how you compare to competing solutions and how customers perceive you. The main output of pricing the product strategically is to establish the best price of your product or services that will maximize the profits, revenue while considering the consumers and market demand
A Pricing Strategy is a method used to establish the best price for a product or service. It helps you choose prices to maximize profits, revenue and shareholder value while considering consumer and market demand.
Author's note
Thank you for reading, God bless.
Very interesting, thank you! An old school chum of mine once told me that only after he switched from his ordinary pricing strategy to professional soft from https://priceva.com/price-intelligence he noticed significant changes in his revenue. So your article is 100% right!