5 Best Pricing Strategies For Marketing: A business man should have the best pricing strategies to grow their business, because a marketer need only one thing in their business growth , which is profit and it comes from sales with strategic pricing of the product, and in this article we are going to learn about pricing strategies.
If your product provides you high profit then definitely your business is going to grow, but for this a marketer has to understand the different marketing strategies like strategic pricing, branding, promotion e.t.c. And among these marketing strategies, pricing strategies play an important role, which we are going to understand today.
The price of a product is decided by it’s value in the market. How much the people are valuing the product or service they are buying is more important than anything.
And if the product is valuable then the demand will automatically increase and in business there is a great rule of “Demand and supply” now a marketer can grow his business by fulfilling the demand.
Now here is a question that how a marketer can analyse that how much customers are valuing his service or product?
So the answer is value-based pricing , where a businessman prices his product on the basis of value provided by that product in the customer’s life.
Similar to this there are some more pricing strategies which are important for an entrepreneur, which we are going to learn below.
5 Best Pricing Methods And Strategies In Marketing With Examples:
Product selling depends upon too many factors like packaging, quality, bending and many more, and among these one of the important factors is the product pricing.
a business needs a strategic pricing for their business growth , it helps to compete there competitors, business growth and also to attract customers
The 5 most common pricing strategies for marketing are as follows:
1. Price skimming | skim pricing strategy:
In this strategy a marketer sets a higher price during a new product launch, and lower down the price when the demand of the product starts increasing.
It is just because when a product announced to be launch then the buyers who wants to be the first person to buy that product no matter what the cost is, they starts it pre-booking to buy that product and after few months the marketer starts lowering the product price just to attract more customers.
This strategy is also used when a product does not have competition for their product in the market, initially they keep the maximum price of the product and when the competitor brings the similar product in the market then they starts lowering the price of the product. Let’s we understand the price skimming pricing strategies with example:
Examples of Price skimming Pricing strategy:
1. Sony Playstation 3: When Playstation 3 was launched, it was sold at 599$ in the US market, and now it has been reduced to below 200$.
2. Apple products: Apple can be the best example of price skimming , because when apple launches its new products like iphone, ipad, it’s prices are maximum and start lowering in a few months.
There are multiple examples like this which are available in google you can search it out.
Now we are going to discuss about the pros and cons of price skimming strategies, which are as follows:-
Price skimming Advantages:
- Higher return in the beginning.
- It helps to test your product value.
- It works when the demand curve of your product is inelastic
Price skimming disadvantages:
- It attracts your competitors.
- This strategy is not for a crowded market.
- Your early buyers can feel cheated.
2. Penetration pricing strategy:
If you are a small business man or want to start a business then penetration pricing strategy is best for you. In this strategy a marketer offers lower prices for their product just to attract new and more customers.
And also with this strategy you can compete with your customers by just offering lower prices than your competitor for the same product.
Examples of Penetration pricing strategy :
For example: Your competitor is selling a shirt in 50$, So you can sell the same shirt in 47$. It is just an example you can apply the same strategy in your products or services. Most of the small business man use this strategy
to compete with their competitors and also if they are entering into a new small business.
Advantages of Penetration Pricing:
- It helps a marketer to enter into the market fast.
- It helps in competing with your competitors.
- A marketer can easily build trust with customers
Disadvantages of penetration pricing:
- A marketer can lose his customer when they increase their product price.
- Marketer gets less profit
- This strategy is applicable only for a short period of time.
3. Value Based Pricing strategy:
If a marketer feels that he has huge competitors in the market , then he should use this strategy to maintain it’s customer relationship and also to get new customers,
In this strategy you provide high value to the customers through your products, and if your product or service is valuable then your sales can’t be affected by your competitors.let’s understand this with few examples:
Value based pricing strategy example:
1. Apple Products: As you all know that the cost price of apple products are too much compared to its competitors products but still it’s product demand is too much in the market.
It’s just because of the value based pricing strategy. Apple uses this strategy to provide a high quality of products like the iPhone, iPad and multiple gadgets.
2. An umbrella and a shirt have almost the same amount of cloth used but the cost of an umbrella is 10$ and the same shirt is 100$ . It is just because of the value provided by that shirt.
Advantages of value-based Pricing:
- A marketer can create a strong brand value.
- It can provide you with a higher margin.
- Customers start trusting their products.
- It increases the demand of the product.
Disadvantages of Value-Based Pricing:
- It’s getting difficult to set the price of the product.
- It takes a lot of time to scale the business.
- Difficult to target middle class and poor people.
4. Cost-plus pricing strategy:
This is the marketing strategy which is used in almost all the businesses. From a tea stall to a big factory, everyone uses this strategy to get profits in their business.
In this strategy a marketer calculates its cost price used in manufacturing a product then he sells his product with a fixed amount of profit, which is called cost plus Pricing Formula used to sell a product.
Cost-plus pricing strategy example:
A businessman manufacture a product or buy from wholesale market at 100$ and sell this in his town or city with 50% margin , that is at 150$ then this called the cost-plus pricing formula where you fix you margin with the cost price of product
Advantages of cost-plus pricing strategy:
- It requires less market research.
- It provides a consistent rate of return.
- It can provide you with a fixed profit.
Disadvantages of Cost-Plus Pricing Formula:
- It increases the price differentiation.
- A marketer can not understand the real value of his product.
- Marketers can not understand the customer’s willingness to pay.
5. Competitive pricing strategy:
In this strategy the price of the product is fixed by the competitor analysis of the product, a marketer provides a little bit more to the customers compared to his competitor.
This strategy is mostly used during completing the competitors, the competitive pricing is used mostly in two ways which are as follows:
Two types of competitive pricing formula are as follows:
1. Low price:
You provide the same product or service at low cost in comparison to your competitors. And you can do this by producing a huge amount of the same product at the same time and labour cost which will decrease the cost price of the product.
2. High Quality:
you provide the same product with higher quality in comparison to your competitors . And With this you can also attract those customers who can pay higher amount of money for high quality products.
Competitive pricing strategy example:
1. As we all know that the product of china are always at low price it is just because of Competitive pricing formula, they produces product in higher amount in short period of time, which decreases it’s labour cost , some other factors are also responsible for their low value, but this is also one of those.
Advantages of Competitive pricing strategy:
- You can easily compete with others.
- Number of sales will start increasing.
- Business growth will be faster than others.
Disadvantages of Competitive pricing strategy:
- It will be a little bit difficult to maintain the high quality product at low cost.
- lower production of products can make you lose money.
- less demand for your product can decrease your profit.
If we sum up all the things which we learn in this is that the pricing strategies plays the important role in your business growth, that’s why you should apply the best of these according to your product and your targeted customers.
All pricing strategies have their own pros and cons which we had discussed above you only have to apply according to your need.
What are pricing strategies in marketing?
Pricing strategies in marketing are those ways through which a marketer can compete the others and also these strategies helps a business man in increasing their number of sales and profit.
5 major marketing strategies in marketing are as follows:
1. Price skimming pricing
2. Value based pricing
3. penetration pricing
4. competitive pricing
5. Cost-plus pricing
What is the best marketing strategy?
The aim of a marketing strategy is to help a marketer in growing his business, and for this there are multiple strategies used by marketers like 4 ps of marketing strategy, pricing strategies in marketing and many others , and each strategies has it’s own pros and cons , you should apply it according to your product, targeted customers and competitors.
What are Four types of pricing strategies?
Pricing strategies are mainly divided into 4 types which are:
1. Premium pricing
2. Skimming pricing
3. Economy or value based pricing
4. Penetration pricing
And now one more pricing strategy has been added in this , which is the competitive pricing strategy.