How to set the price for a product or a service of your brand
Setting the price for your product or service is crucial to your success.
Pricing what you offer comes from a set of calculations of targeted segments and their ability to pay, competitors, market conditions, initial and marketing costs among other factors to make a profit out of the selling price.
Pricing is a flexible process as it can vary from time to time and can be seasonally adjusted too.
It reflects multiple changes in your project or organization, as your drives may change over time.
Pricing Main Objectives:
- Reaching targeted profits
- Fitting in the market, meetings customers ability to pay
- Fixing business position along with other factors in the market mix model
- Increasing market share
- maintaining products or service quality
Pricing is the main element of your strategic plan and the four P’s marketing model, pricing is focused on making profits, while the other 3 P’s (Product, Place, promotion) being focused on costs, however, they play a direct role in setting the price.
Pricing strategy is the broad approach of your long-term of your strategic planning of your brand or organization.
While the actual price can be changed, the strategy stays consistent as a guidance for the price setters.
Setting the products or service price according to operation cost, and market demand to maintain operational efficiency.
seeking maximum profit or covering cost and passing the break-even point.
maximize and increase the current customers base and encourage cross-selling.
positioning strategy and luxury image for business to reach a certain value position in the buyer’s mind, mostly used to enforce luxurious and premium pricing.
Mostly used to maintain the relationship with the current customers or extending and building relationships with potential customers.
After deciding the long-term strategy for pricing, now you need to determine the short-term tactics to follow.
It may vary according to internal conditions like surplus inventory or external conditions like responding to competitive prices.
You always need to set your pricing tactics according to your pricing strategy, for instance, luxurious brands don’t offer discounts, instead, they offer giveaways and bundles.
it can be found in industries where the main product relies on other complementary products to excite its functions.
As the provider can lower down the price of the main product a bit as the complementary product will fill the gap, like the shaving razors and the razor blades, or the DeskJet printer and the ink cartridges.
It’s a more flexible pricing method and can be seen a lot with e-commerce businesses, as the price can be adjusted at the purchasing time, price based on the type of client, orders quantity, payment terms, and method, etc.
Using this pricing tactic allows you to reduce the price temporary seasonally, periodical and randomly.
Pricing near competitor’s price to stay in the market competition.
Selling products or services in a bundle as each unit price becomes lower, where sometimes the products or services can be only sold in bundles and in other situations you can give the liberty to the customers to either buy your products or services separately or in bundles.
Initially setting lower prices to enter the market or preventing competitors from entering, lower prices come at the expense of lower margins as well.
Setting higher prices to set luxury and premium products or services to maintain an elegant image of your brand in the customer’s minds.
highly priced products or services to cover the cost of production and development, mostly at market entry and before competitors getting into it.
You can use that type of pricing to have a physiological impact on the customer’s minds, where the product or service price doesn’t pass the price limit of what the client willing to pay and also doesn’t go under the price you are willing to sell for (reservation price).
It can be seen a lot in retail stores with pricing tags like 1.99$.
Setting your product or service price:
Setting the price doesn’t need to be always fixed, it can be also dynamically calculated at the purchase time, you can see that often in airplane ticketing system, as the price may vary according to the time of reservation for example at holidays.
It can be also seen a lot in shared economy businesses like uber, as prices of the trip may vary according to surge charges of high demand.
Prices can be also affected by other factors out of the demand the supply, as the price may vary according to other dimensions of the purchase, like the size of the down payment, monthly payments, and the number of payments.
Also, prices can be tailored to a certain segment of your customers as well in case of tailored products or services.
Setting your product or service price high comes with the perception of your customer to receive high quality as well, so you need to keep an eye on price/quality relationship.
Also, market condition, your industry economics, and the current demand for your offering need to be always measured and reacted to.