One of the most important things consumers look at when shopping for an item is its price.
If an item is too expensive, the customer won’t buy it, no matter how nice it may be. While marking your items’ price low may be an appealing option, that could backfire on you as the seller and spell doom for your business; if an item is too cheap, you won’t be able to cover costs and gain any profit.
So how is it possible to strike a balance and price an item at a point where consumers will buy it and you can still survive as a business?
Here are a few strategies you can employ, depending on the size of your business and your product.
High & Low
Premium Pricing is a great way to get a fledgeling product off the ground and still make a profit.
When your product is still fairly new, you can introduce it into the market at a higher price. This emphasizes your product’s value and makes it seem as if it’s a cut above the rest.
If you’re dropping into a market ripe with competition, Market Penetration pricing may be the right choice for you.
You would set your prices at a point lower than that of your competition, which entices customers and steadily builds brand awareness.
This strategy can be a bit of a risk, however, because of the fact that sellers will lose money until established. Once enough ground is gained, though, the seller can progressively raise their price and make back more revenue over time.
Psychology Pricing is a simple yet really cool method you can use to attract customers to your products.
A good example: I often find myself being enticed into buying a candy bar when I go grocery shopping. When picking out my treat, I find myself going for the bars that cost forty-nine cents over the bars that cost fifty cents.
Psychology pricing is as simple as that.
Consumers typically look at the first number when it comes to a price tag. That dollar difference between $19 and $20 can entice a surprising amount of people.
Yes, you don’t get as much profit when marking the item at $19 instead of $20, but you draw more customers over time.
Price Skimming is a great method to continually draw customers in amidst rising competition.
Start with a higher price for your good, and draw in the customers who are willing to pay that price for said good. Once that wave’s been satisfied and new competition begins to pop up, reply by lowering your prices to appeal to the next wave of consumers, and so on.
Economy Pricing is a great strategy for larger businesses.
This calls for the seller to really limit the marketing behind products. This makes prices drop very low. Larger sales volumes cover this difference, which is why this is generally too dangerous a strategy for small businesses.
Bundle Pricing is another one that works really well for bigger businesses and is a popular option with consumers.
This calls for a group of items to be bought together collectively for a price cheaper than the sum of the items being bought individually. This is a great way to clear out extra or unwanted inventory, making it a great option for warehouses.
Proper pricing can be a tricky thing. Demographics, business size, and your products all play vital roles in determining exactly what way of pricing will work best for you.
Sometimes, prices need adjusting and re-adjusting. Don’t be afraid to keep tweaking until you find the spot the works best for you!