The aim of every business is to get their products and services to the customer in exchange of monetary values. Similarly, every customer acquires products and services in exchange for a monetary price.
In order to obtain a competitive price and edge for products and services, every organization must devise a way or strategy for pricing.
Pricing is the end product of several calculations, research work, risk taking ability market and customer understanding.
Considerations in pricing a product or service are influenced by the:
+ Production/Manufacturing cost
+ Segment of the product
+ Paying ability of potential customers
+ Market conditions
+ Actions of competitor
+ Profit margins.
Pricing strategy is the approach used to set the price of a product or service. It includes all the methods used to calculate the right price, and is focused on generating and increasing the revenue for an organization, with the goal of keeping both demand and profits as high as can be.
Various Pricing Strategies include:
+ Penetration Pricing. This involves pricing products and services low, so as to infiltrate the market, and gain a market share. New businesses usually apply this method of pricing.
+ Economy pricing (Aka No Frill Low Price). This strategy involves targeting customers looking to save more money on products or services.
+ Use of Psychological Pricing Strategies. The key with this pricing strategy is creating high quality products and services that are perceived to be high value and marketing them to the elites and high income earners. Businesses using this strategy must develop ‘luxury’ products or services.
+ Use of Psychological Pricing Strategies. This strategy involves fixing prices under whole numbers or round figures, in order to create a psychological impact of perceived cost minimization. For example, instead of fixing N10,000; N9,988.90 is fixed.
+ Pricing as Per Geographic Locations. This involves pricing products and services based on location. Delivery service in Abuja or Lagos, will be more expensive than delivery in Kano, or Benue.
Other strategies include
+ Pricing Strategies of Product Line
+ Pricing Optional Products
+ Pricing of Captive Products
+ Pricing for promotions
+ Value Pricing a Product
Whatever pricing strategy is used by a business, it should match the target audience as a low earner cannot afford a luxury item; value of product and cost of production. A proper and effective strategy will always convert to sales and a growth in business.
