How To Implement An Effective Pricing Strategy?
Effective Pricing strategy : Price plays a key role in consumers’ purchasing decisions. When a prospect resists buying one of your products, this is 95% due to the price of the item, which is a barrier to purchase. Developing an effective pricing strategy allows you to offer a satisfactory offer to your customers because it corresponds to market needs.
A good pricing strategy has a major impact on conversion rates. This article presents the process to follow to establish an effective pricing strategy.
1. Establish Your Marketing Strategy First
An effective pricing strategy begins with establishing a good marketing strategy.
Positioning is a crucial step in the implementation of any strategy. Strategic positioning (or marketing positioning) refers to the location of your brand, your company or your product in the mind of the customer.
What price is the target willing to pay? It is important to put yourself in the shoes of the customer, in order to know the perception he has of the market, and therefore in what position he places your company. The customer’s perception is the reality of the market, which does not necessarily correspond to the positioning that the company thinks it has.
Positioning focuses on how a company fares against the competition, i.e. the competitive advantage it presents. The objective is to position itself as radically different from other companies in the sector in front of the customer. A successful strategic positioning generates a strong impact on the consumer. Moreover, it entails regular communication and marketing of a unique brand to targeted customers in the market.
To define a good positioning for your company, it is necessary to:
- Identify the sectors concerned (the market in which the company operates)
- Identify competitors
- Identify targets
- Defining Competitive Advantage
It is important during a pricing strategy to take into account the positioning desired by the company and to know how it will vary according to the prices of the products. It would then be a question of setting a price that would favour a successful strategic positioning. This would require market research.
2. Pricing Based On Costs
This is the simplest pricing strategy. It consists in defining the price of the products according to the costs and the expected margin.
For example, if you want to generate a 10% margin and your product has a cost of 108 dollars, then its selling price should be estimated at 120 dollars.
The unit cost of products should not be determined only based on the amount of money paid to the supplier for procurement, but should also depend on indirect costs such as costs related to marketing and running the business.
To set his price, the seller must therefore consider several factors: the actual cost of the product, but also the target clientele, market constraints and the sector of activity in question.
3. Study The Prices Applied By The Competition
Since one company never occupies the entire market on its own, it must set its prices taking into account the prices charged by its competitors.
However, the number of competitors is generally very high! It is therefore difficult for the company to be informed in real-time of the evolution of the prices of all its competitors and to monitor the prices and promotions applied by the players in the sector.
However, there are tools that allow companies to check their prices against the competition with more or less extensive reports. For example, A Check tool organizes your monitoring and automatically tracks competitor prices so you can reactively adjust your prices.
4. Use Effective Pricing Tools
Pricing tools make it possible to dynamically set prices and observe the prices adopted by the competition.
Depending on the solution chosen, you will be able to take advantage of many practical features, such as:
- The study of competing prices
- Price evolution reports, on your store and among your competitors
- Multiple product pricing, depending on defined characteristics (size, colour, etc.) or available stock
- Automatic repricing based on specific events
The quality of the data of the pricing tools is very important, and a lack of data is synonymous with a deficit of gain that can go up to 20% of the turnover. Poor data quality from pricing tools can obstruct the smooth running of certain operational processes: unsuccessful interventions in the field, polluted marketing campaigns, distorted understanding of the market, biased performance indicators or erroneous invoicing.
In view of this observation, it is necessary to make data quality processing fast, automatic and efficient. This is what a check tool does, crawling the data contained, twice a day, for qualitative data.
5. Automate Your Pricing Strategy
Go further in your pricing strategy by automating price management.
Powerful pricing tools allow you to create, manage and optimize your pricing strategies in complete safety, minimizing the risks and delays associated with manipulation and human decision-making. Your prices are thus immediately adjusted following the price changes of your competitors and adapted to each of the marketplaces on which your products are referenced.
Also Read : Scrum Methodology