PRICING

• Pricing strategy is the process and methodology used to determine prices for products and services
• Pricing strategy is a crucial element of a business’ overall strategy, influencing various aspects of operations, sales, and profitability
• Skim pricing involves setting new product prices high and subsequently lowering the price as competitors enter the market
• Competitive pricing involves pricing products based on the price of competitive products, rather than cost or target profit; usually cheaper than competitors
• Dynamic pricing varies based on marketing and customer demand
• Value-based pricing prices a product based on how much the customer believes it’s worth
• Penetration pricing involves entering a market at a low price and increasing prices over time
• Economy pricing prices a product low because of low costs of production, marketing, and advertising, and relies on high sales volume to generate profit
• Premium pricing deliberately prices a product high to encourage favorable perceptions of the brand based on the price
• Cost-plus pricing adds a fixed percentage on top of the cost of producing a product, regardless of consumer demand or competitor’s pricing
• Freemium pricing offers a product for free alongside paid versions with more features
• Project-based pricing prices each finite service or project on a case-by-case basis according to the value of the outcome instead of on the time spent to complete it
• Value creation involves including only those elements in a product or service that a fully-informed customer should be willing to pay for, which is what we call “value”
• Value communication involves communicating credibly, in monetary terms, the differentiating benefits of your product
• Price Structure is how a company decides how much to charge for goods or services
• A pricing structure can convey a product’s value to customers
• A pricing structure can attract customers, with a low-priced product structure being effective for a broad range of customers
• A price structure allows you to create product tiers with unique features and prices
• Price structures can establish product exclusivity, making high-priced products hard to get
• A price structure can help align your sales strategy and marketing, sending a message to consumers about the kind of product you offer and about your company
• Businesses often use a flat-rate price structure for services
• Companies use tiered pricing structures to differentiate levels of the same product type
• Pay-per-use charges customers based on how much they use a product
• Accessory pricing involves setting a low price for a core product
• Companies use a penetration pricing structure to gain market share
• Companies sometimes employ a price structure if they’re anticipating high demand for a product
• Bundle pricing mixes products with different points
• Psychological pricing tries to alter a price point to make a tangible difference in sales
• Luxury brands often employ a premium pricing structure for the highest quality product or consumer experience
• An affordable pricing structure aims to provide consumers with the best deal in the marketplace
• A variable pricing structure allows a company to negotiate with each customer
• Companies may offer their service or platform for free to increase users and find a way to monetize them
• Value-based pricing strategy will fail unless the offer’s value, and how it differs from a competitor’s, is actually understood by potential customers
• Value communication can have a great effect on sales and price realization when the product or service creates value that is not otherwise obvious to potential buyers
• Pricing pyramid is comprised of many layers creating a foundation for price setting that minimizes erosion and maximizes profits over time
• Market analysis involves thoroughly analyzing the market, including customer behavior, competitor pricing strategies, and industry trends
• Value proposition identifies and emphasizes the unique value that the products or service offers compared to competitors, and sets prices accordingly
• Cost evaluation assesses production, distribution, and marketing costs to establish pricing that covers expenses while ensuring profitability
• Pricing objectives involve clearly defining pricing goals, such as maximizing profits, expanding market share, entering new markets, or fostering customer loyalty
• Segmentation and tiers tailor pricing to different customer segments or create pricing tiers based on features, usage, or customer preference