Setting the right price for your products and services is a very important process. The price shouldn’t be too cheap, nor should it be too steep. The delicate pricing of a product or service is an important factor in fighting off competitors. Some companies use high pricing to represent their products scarcity and quality. Other use low pricing to directly compete with their competitors to obtain the highest market share.
If you are a company that only caters to the rich then price really isn’t much of an issue. In fact you should set the price higher than your competitors to show that your products and services are of the highest quality. Through price manipulation, one can manipulate the psychological response of his/her target market; luring the consumers to buy from you.
A company that caters to the average people needs to be more delicate in their price since that is a major factor for most people. Most people want the best bargain. If you’re selling high quality products, strategically pricing it a little higher than most of the competitor’s products is a good signal to send to your consumers that your quality is better than the rest (and it needs to be). Price the product too high and most of the consumers will be turned off.
In the end, pricing is a psychological game. Pricing is a game that shows how consumers will react through the pricing structure of your goods and services. By doing research on all your competitors’ pricing structure on their goods and services; strategically price your products to obtain the highest return on investment (ROI). Through research, calculation, and psychological behavior, it is possible to obtain the highest ROI.
10 Comments
pricing is a very important topic for business, it’s important to find a balance, but can be very difficult
Yea Kirk. Is good to research the price of your competitors to better pinpoint the right pricing.
When pricing you definitely have to determine what type of cliental you want to attract. Higher prices are set sometime not because the product is superior but only because the seller wants to keep the rift raft out.
Determining the client you are targeting is certainly crucial since the price you set is targeted to them specifically. It is also true that the seller set high prices on their product so they don’t have to deal with some people because it is not in the best interest for the seller. You sure thought a lot to it Debo =). Thanks for commenting!
Pricing is difficult, especially for new businesses. I know it’s something I have struggled with.
Best to research all your competitors pricing structure to find the right price for your product. If you know your quality suffers price it lower, if quality is higher than price it a little higher. There’s no guarantee because of so many factors but it is a good start.
David,
Great post.
It’s critical to know exactly what your competition is doing, especially for retailers. The big chains have a list of items where they MUST have the lowest price. They shop their competitors daily. For example, a 100 watt standard “A” light bulb retails for about 25 cents at every discount store and home center. But, specialty bulbs are priced much higher. The chain makes little or no profit on the leader but makes substantial margin on the others.
It’s all about being PERCEIVED as having the lowest price on every item. The facts are much different.
Indeed Mike, Big chains have loss leaders to get the consumers to shop on them and then make it up from other items. Being “perceived” to having the lowest price on every item is more crucial. Look how great Wal-Mart is doing.
Great Post! Surely is a hot topic with steep competion out there for almost any given business. Thanks for the insight!
Your welcome Sue.
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