Pricing is what makes or breaks a customer for you. As a business, you cannot have the price soaring or have them so uncompetitive that you don’t end up making anything as profit. A low price means increase in consumer base but low profit; high pricing means customers find alternatives. So what is an effective pricing strategy and how can one build and protect brand with effective pricing?
Determining effective pricing strategy
A business can maintain existing customers and attract new clients only with rise in profits. Since, most businesses understand that there is a delicate link between customer service needs and maximizing profits – it becomes all the more necessary to arrive at a pricing strategy, where profit is not compromised in the name of service.
- Profit is the key – do your research, sell your brand and make profit.
- Research is the fundamental of pricing strategy. In research you must cover the market, competitors and understand all related costs.
- Market research should be conducted to know the base price and maximum price consumers are willing to pay for your goods or service.
- Carry out a comparative analysis to find value of your goods of service in comparison with your competitors.
- Understand uniqueness of your product in comparison.
- Communicate the advantages of your product or service and make a brand name
- The goods or services you’re providing should be of top quality, since consumers are willing to pay more for a brand they trust.
- Reward customers for their loyalty toward your product or service.
Effect of MAP violations on manufacturers
As more and more retailers have entered market, the competition amid retailers has reached new heights. This rise has amplified the level of anxiety of manufacturers too. As competition intensifies amid retailers, manufacturers have to step in to determine prices.
Manufacturers have to step in to see how this retailer competition will affect prices and whether the prices will tumble below MAP – minimum advertised price.
Since manufacturers collect their share of revenue before retailers’ price the product, MAP violation can lead to sizable fines and/or penalties and degrading brand value.
- If a retailer chooses to sell goods or service below the manufacturer suggested price, the retailer is selling it for lesser than what the supplier wanted. Seeing one retailer sell a product below MSRP, other retailers also begin to sell it below MAP. This can degrade brand – prevent the manufacturer from becoming a brand.
- Fall in profit per unit of a product leads to fall in retailer’s willingness to pay for it. Manufacturers must thus decrease wholesale price as market price falls, so profit margin doesn’t decrease.
Pricing is one of the most important parts of every B2C strategy, yet pricing policy of most marketers is very ineffective. Since, effective pricing is necessary, here we will learn of some factors to consider while developing a pricing strategy.
Of course when you are introducing a unique product or service, and there is not direct competition for the same, you can establish a challenging price. Since, competition defines price, in this case you are free to define your own price.
In this case you need to ensure –
- What prospective clients can pay for the product or service at offer?
- And in this relationship, where should the price fall.
In all other cases, you can define a price strategy after:
- Considering the value your product or service provides in contrast to your competitors.
- Drawing a research based consensus on what the market will truly pay for your goods or service.
- Considering the brand primary and set a competitive price. Selling for a lower price than competition could mean your offering is inferior and may find fewer takers.
Irrespective of the pricing strategy you’re following or the offering you’re making, always set a price that maximizes profit.