Your product and service’s price is a vehicle for achieving broader business goals – such as increasing sales volumes, profits, stabilizing revenue, securing a market share, or boosting cash flow. Thus, pricing is important for your future. In this post, we provide five types of pricing you can consider for your product – what will you choose?
High or luxury pricing is usually chosen by brands that maintain their identity around quality or exclusivity. Here, the pricing itself serves as a key differentiator of the product to the audience – who reason that because it is high, the product is worth it. Another time to consider high pricing would be in the case of limited stock (for example, fashion collection drops such as Nike).
2. Competitive/Medium Pricing
The mid-price model is what the ‘everyman’ would prefer. In this case, you take a high-quality product and somewhat lower the price in return for deeper market penetration and more target audiences. If the price is too low, otherwise you will not be able to achieve your level of quality. This pricing is most common with mass-market goods.
3. Low Pricing
Low pricing takes the demand curve seriously and assumes that if the price drops drastically, the demand will increase proportionately. Low or economy pricing is usually chosen by discount or value brands who want to make high demand profitable. These products typically carry minimal branding, marketing and a “no-fuss” approach.
4. Price Skimming
Price skimming combines the medium and premium pricing strategies. What happens is that a brand rolls out a new product range at a high price point by creating hype around the launch. Influencers and early adopters would be willing to pay high to get it first. Later, the prices are scaled back down to a mid-range point to bring more mass appeal and keep sales volumes high. Price skimming is common with electronic goods, apparel, and consumer goods.
5. Price Penetration
Penetration is the opposite of skimming. Here, products start off at budget prices and increase towards the medium pricing in some time. The period of time that it takes to lower varies from product to product, though most products make it happen within the end of the first sales week.
The Price is Right
Raising prices can boost profits but also hurt consumer demand, so find a neat compromise for your product. A robust pricing strategy needs to take all this into account. The Bumblebee Branding Company in Chennai, India, can help you prepare a pricing strategy.