The pricing of your product or service is a key element in determining the profitability of your business. If your price is too high demand will reduce and you may price yourself out of the market. If your price is too low, your sales volume may not generate enough revenue to cover the costs associated with your business.
While retail pricing strategies may vary from one business model to the next, implementing good pricing practices should be a standard for all retailers. Not only do good pricing practices improve customer satisfaction but it also assures customer loyalty.
Why Is It Important?
- Pricing is a key determinant in the decision making process customers use to purchase a product or service
- It is important to establish how much your target market will pay for your product.
- It shows you how sensitive your customers are to changes in price.
Pricing For Different Life Cycles
At different stages of your product or service life cycle you may change your pricing strategy to suite your business needs. This includes when you are selecting which strategies to focus on.
New LaunchLow price strategy – used to encourage trial of your product or service. As well as repurchase on a regular basis.
High price strategy – used to generate profits to cover launch costs. Product or service may have a unique point of different.
Growth StageLow price strategy – used short term to stop new competitors entering the market.
High price strategy – used to grow profits.
Decline or Maturity StageLow price strategy – used to generate enough revenue to cover costs.
High price strategy – used to maximize revenue in order to fund new projects.
Price sensitivity is the extent to which a customer’s purchase will be influenced by price.
The less price sensitive your customers are, the greater control you have over your pricing.
The more price sensitive customers are, the more you need to monitor your competition and the market to ensure you remain competitive in the market.
(Culled From Shopify.com Blog-How to Find the Perfect Product to Sell)