| ||
| ||
|
Marketing Information | |
| Domain Names | E Books | Email Marketing | Ezine Marketing | |||
| Internet Marketing | Marketing | PPC Advertising | SEO | |||
| Traffic Building | Web Design | Web Development | Web Hosting | |||
| ||||||
|
| ||||
|
Pricing Strategies in Marketing
Price is an often overlooked marketing strategy, as many tend to focus on promotions or advertising. Pricing strategies, however, can have a large impact on sales and (more importantly) profit. The price is what your customer pays and/or what the end consumer pays for a product or service. In the case of products not sold directly to the end user, pricing is often described as "wholesale" and "retail." When the distribution channel is long (such as when there is a manufacturer, broker/distributor, retailer, and end consumer), multiple mark-ups can occur between the wholesale and the retail price. Your optimal pricing strategy will depend on more than your costs. Forces within your business environment such as your competitors, your suppliers, the availability of substitute products, and your customers come into play as well. Positioning (how you want to be perceived by your target audience) is also a consideration. Pricing Strategies There are a variety of pricing strategies in existence. Each strategy is used in a different set of circumstances. Some of the things to consider when choosing the best strategy for your situation are your costs; both short term and long term sales and profit goals; competitors' activities; and customer lifetime value. While there are others, a few of the more popular pricing strategies available to you are: Cost plus mark-up. Here, you decide the profit you want to make before setting the price. Figure out your costs and your selling price is simply your costs plus your pre-determined profit number. This approach helps keep your profitability top-of-mind, but may also result in prices that are out-of-line with customer expectations and competitor pricing. Competitive pricing. When competitive pricing, you look at the prices your competitors are charging and use those prices as a benchmark when pricing your own products. You and your competitors' positioning strategies will determine whether you price at par, slightly below, or slightly above the competition. Price skimming. This technique is used when you offer a unique or scarce product with few or no substitutes. The price is set high, resulting in high margins for the seller. Buyers are those that are willing to pay the price because of the product's prestige and/or uniqueness. In the case of a scarce but necessary product, customers pay the price because they have no choice. Often, price skimming is a short-term strategy as competitors enter with their own products, bringing prices down. In the case of scarce products, either the need passes (salt during an ice storm, for example) or the shortage is temporary. Before considering this technique, be aware that if your customers feel you have taken advantage of them, you could be building "bad will" for your business. Penetration pricing. This is the opposite of price skimming. Prices are set low in an effort to gain large market share. Because the penetration price does not cover costs, this is also a temporary strategy. For this strategy to be profitable, customers must be willing to pay your normal, higher price. Loss leader. Here, you price one or more products below cost to attract customers. You hope that those customers will purchase other profitable products from you. This strategy is often implemented as part of a short-term promotion. Close out. This is a tactical move to clear slow-moving or excess products out of inventory. You sell the inventory at a steep discount to avoid storing or discarding the product. End-of season merchandise, perishables that are about to expire, and prior software versions or book printings are examples of eligible closeout items. Multiple unit pricing. Also called quantity discount. The customer gets a price break for purchasing multiple units or large quantities. Membership or trade discounting. Here, some customers (those that you know are heavy or frequent purchasers) are given an elite status, which gives them the privilege of a price discount on their purchases. This elite status can be based on occupation, membership in an organization, subscription status, or some other criteria. Variable pricing. With a variable pricing strategy, different customers pay different prices. Often, this strategy is used for project work. Each project has unique characteristics so is priced by the job. In other cases, the price is negotiated with each customer (cars are an example). Versioning. This is offering the same product with different levels of functionality. Each level is priced differently and includes a different bundle of attributes. Software and Web hosting companies often use this pricing strategy. A trial or very basic version may be offered at low or no cost. Upgraded versions are available at higher costs. Bundling. Here, several items are sold together at a price less than if they were purchased alone. By bundling a popular item with lesser-known products, you can increase your sales. Additionally, in the case of inventoried items, you may be able to avoid a closeout. Impact of Internet on Pricing Strategies Aside from making some pricing strategies more prevalent, the Web has also affected the importance of choosing correct pricing strategies, by allowing customers to be better informed and more vocal. In the case of consumer products, the purchaser can go to www.MySimon.com or another price comparison service and in seconds look at a side-by-side price comparison from several online retailers. There are also numerous forums and discussion boards where members discuss their experience with providers. For example, your customer in Paris can complain or spread praise about you to a potential customer in St. Louis. This means the customer can not only make a better decision before purchasing, but can also better spread the word (both praise and complaints) after the purchase. For these reasons, the Web has made it more important that you remain competitively priced with your competition and maintain sensible pricing practices. Combined, smart use of both the Internet and available pricing strategies can help boost your company's bottom line. About the Author Bobette Kyle draws upon 12+ years of Marketing/Executive experience, Marketing MBA, and online marketing research in her writing. Bobette is proprietor of the Web Site Marketing Plan Network -- http://www.WebSiteMarketingPlan.com -- and author of the marketing plan and Web promotion book "How Much For Just the Spider? Strategic Website Marketing For Small Budget Business": http://www.HowMuchForSpider.com
MORE RESOURCES:
Marketing - Google News |
|
|
|
RELATED ARTICLES
Knock, knock. Whos There? Your Target Market, Are You Listening? Have you ever had a conversation with a person who wasn't listening to anything you said? This one-way communication experience is a big turn-off and many times frustrating to cope with at the time. Is this occurring in your marketing? Oops, no one wants to think of their business as turning a deaf ear to their market. How to Up-Sell Change As Freud cautioned, it's insanity to keep doing the same thing and expect different results. You know things have to change. The Beginners Mail Order Business Guide No claim is made that the steps outlined would be successful for someone else. Each individual should obtain whatever professional advice may benecessary for his particular operation. The Secrets of? A lot of advertising and mailings promise to reveal the secrets of something. Most of this kind of mailings deal with search engine optimization. Thinking About More Business What does an old Russian joke have to do with getting new business? Did you increase your business in the past 12 months? Don't discriminate between more new clients or old clients spending more money--count the increase either way. If you didn't, you really should be asking yourself why not. Hermey Wants To Be A Dentist December marked the 40th anniversary of the original broadcast of the classic "Rudolph The Red-Nosed Reindeer"©, network television's longest-running, highest-rated holiday special. From my earliest childhood memories, watching Rudolph has been a tradition, one that continues today with my own family. Heres A Robust, Turnkey, Interactive. Best of Breed, Mission-Critical Solution to Kill Buzzwords Fellow Publicity Insiders, what does this phrase mean? "We envision a center of excellence where our accelerated changeagents can maximize their core competencies." Huh? - or - "The company is a global leader in pressure-sensitivetechnology and innovative self-adhesive solutions for consumerproducts and label materials. How to Manage Your Marketing Mix Here's the deal: advertisement is not marketing. It's like saying you want to have a garden, but you're only willing to plant the flowers. Marketing, Lead Generation, and Research: A 3-in-1 Solution I Hate Cold CallsLong before I started my business, I realized that I wasn't good at telephone sales and that I would need to generate leads in another way. I developed a sure-fire way to generate those leads, interest in me, and my business, through the use of telephone market research. B2B Marketing Tips - Create an Interactive Online Experience for Clients Business to business communications on the web are as stale as a piece of week old toast.As a marketing director you want to give your company the biggest bang for it's marketing buck. The 5 Musts of Marketing For most of the small business owners I work with, marketing has become the equivalent of a four-letter word. Inevitably, when I ask the question, "Do you have a marketing plan?" or "What marketing activities do you engage in?" I get the full gamut of responses from the proverbial deer in the headlights stare, to a vociferous, "I hate marketing, it's the least favorite part of my business!"After years of witnessing this reaction, and learning a bit about modern marketing, I'm starting to understand why traditional marketing is perceived and experienced as a necessary evil and avoided like a root canal. Small Business Bonzai Marketing Do you own a small business? Do you wish to increase sales? Do you wish to draw more customers into your store or find more customers for your service business? You can do this for a relatively low cost by building as small sales team of high-energy people. Direct Sales marketing will help increase your business, future referrals and image in the community. Create a Blueprint for Your Success Having a strong foundation enables you to build a thriving, profitable life and business. A simple method to create this foundation is with Discovery, Vision, Planning and Benchmarking, the four cornerstones of your life as well as your business. Forward Thinkers Stay Ahead of the Curve What is it like from a marketing perspective to be yesterday's news? We rely on what is tried and true in marketing because it is usually safe, tried, and tested. It saves us time, as well, since we don't have to put on our creativity cap to craft an innovative strategy. Celebrity Product Placement: A Primer With more and more companies wanting to integrate their products into the lives of celebrities, now seems like a good time to take a closer look at Celebrity Product Placement, describe three common approaches, and outline what steps can be taken to guarantee results.The term "Celebrity Product Placement" is used to describe several related techniques, but its definition applies to each: free products are distributed to celebrities in expectation of a promotional benefit. Have You Captured Me Today? There are many Web sites I visit every day and will probably never return to again. It's not that I didn't like the site, or that I wasn't interested in the topic, services, or products offered. Dont Let Your Business Cards End Up in the Trash Business cards are such wonderfully creative little marketing products. Most of them, unfortunately, end up in the nearest trash basket. Improving Lead Generating and Conversation Rates: Think Like a Farmer John's a freelance photographer in Ohio who called to tell me of his frustration with the advertising and promotional campaigns he has tried in the last couple of years. Each time he does a promotional mailing to his list of 10,000, he is lucky if he gets one or two inquiries. Is Your 4X4 Trail Rated? "Traction. Articulation. Creative Online Marketing For Salespeople and Business Professionals New to a sales career? Want to market yourself but don't have the money to do so? Tired of cold calling and prospecting? Wish there were an easier way to get the word out about your services?Does this sound like you? This was what I felt like when I got my first sales job selling copiers ten years ago. My sales manager back then was into the traditional methods of getting new business; that is, prospecting, cold calling, booking appointments, doing product demonstrations, and closing sales.
|
| Domain Names | E Books | Email Marketing | Ezine Marketing | |
| Internet Marketing | Marketing | PPC Advertising | SEO | |
| Traffic Building | Web Design | Web Development | Web Hosting |
|
Home | Site Map | Traffic Building
| Free
Classified Ads | Free-For-All
Ads | Reciprocal
Links | Search
Engines | |
| Copyright © 2006-2007. The Highland Marketing Group. All Rights Reserved. |
|
| ||
|
