A company can employ a range of pricing strategies while selling a service or product to customers. To decide on the most appropriate pricing strategy for an organization, top executives must first identify the company’s pricing context, pricing segment, pricing power and their company’s competitive pricing response strategy. The executives also have to make sure that the current and prospective markets offer the kind of prices that the organization can comfortably afford. This is an important step in identifying the kind of pricing strategy to be adopted.
Finding a higher price point for your product may seem like an easy task but it may not be. For instance, if the competition is charging less than your competitors’ products and services, you may find that your product may not fetch a higher price when sold at a higher price point. Alternatively, you may find that your competitor’s products and services have better brand value because they are perceived as more reliable and trustworthy. In these cases, you would have to come up with a compelling argument to justify charging higher prices for your products.
While assessing the strength of your competitors’ pricing strategy, it is important to remember that customers feel price differently depending on several external factors such as the reputation of a firm, its financial health and size and its target market. The scope of the service and the benefits derived from using the product also determine the price. For instance, a cheaper price does not necessarily mean lower quality because customers can still get the same quality of service and the added benefits at a significantly increased cost.
Understanding the competition in the market enables you to evaluate the strength of your pricing strategy. For this, you can contact customers and get feedback about how the services and the products they purchase from your rival competitors compare with the services and the products offered by your competitors. In addition, you can contact various industry organizations and experts in the field to get information about current market conditions. These will help you evaluate the strength of your pricing strategy against the external factors that affect the market.
It is important to identify the important factors that affect the level of competition in the market. These factors include product features, service and price. In order to effectively price your products, you must incorporate important factors into your decision-making process. You may use the results of market research to estimate the likely impact of new regulations or legislation affecting the price of a certain product. This way, you can ensure that you maintain an effective pricing strategy against the changes in market conditions.
As part of your overall pricing strategy, it is important to monitor the performance of your competitors. You can achieve this by conducting a comparative study with their prices over time. But before you conduct such a study, you need to identify which factors are most important to your customers. Identifying the factors that are most important to your customers will help you determine which pricing strategy you should adopt. For instance, if your customers are looking for competitive prices, you will have to choose a pricing strategy that will provide you with the best competitive advantage. And if you have to reduce your costs, you will need to adopt certain strategies to reduce the cost of manufacturing.