Pricing management is essential in deciding the pricing of your products and services. It shapes the brand image of your business. There are various pricing strategies in the market, and you have to choose your strategy wisely. It depends upon your business goal. Thus, this guide consists of all the essential pricing strategies you can choose from for your business. Let’s begin the guide!
What is Pricing Management?
Pricing management refers to considering all the essential information and perspective to arrive at an effective pricing decision. This pricing strategy in marketing considers the factors. It includes market research, price optimization, and immediate adjustments. It helps in increasing the revenue and profit margins of the company.
The pricing strategy is more complex than it sounds. It has to account for various factors, including revenue goals, marketing goals, target audience, brand positioning, and attributes of the products. In pricing management, you also have to consider various external factors. They include consumer demand, competitor pricing, and the economic trend.
Therefore, pricing strategy is about setting a price considering overall goals. It includes the business, audience, and all other external factors.
How Does Pricing Management Work?
Pricing management sets up the prices of the products and services while fulfilling all the business goals and customer expectations. Nowadays, it has become extremely challenging for businesses to maintain healthy pricing after the existence of various influencing factors. It includes varied costs, competition, dynamism, and much more.
Therefore, pricing management comprises various pricing strategy types based on different target customers. They all help in completing the primary target of a business. You choose the strategy based on how you want your brand to be perceived.
Once you choose the pricing management strategy, you must follow its basics. You will eventually set up the best possible price for your product and services. Thus, you will build a better brand image, generate more revenue and profits, and provide you with slow and steady growth.
Top 10 Pricing Strategy Types In 2023
1. Geographic Pricing
Geographic pricing refers to setting up prices based on the geographic locations of the consumers. It helps decide the right price for the consumer based on their income level, shipping requirement, and other native factors. This is how pricing strategy marketing becomes successful and profitable for the company.
2. Bundle Pricing
Bundle pricing is selling two or more products or service packages together at a single price. It helps in adding more value to the consumers. It also helps generate more revenue and profit for the company by bunching several products at a time. Often, they are also sold as complimentary products.
3. Premium Pricing
In pricing management, premium pricing refers to the strategy that allows the products to be sold at a higher price than competitors. It aims to set your brand image as a high-value, luxury, and premium brand. Here, the company mainly focuses on the perceived value, not the actual value. It is generally utilized by companies who want to set themselves as an industry leader.
4. Dynamic Pricing
Dynamic Pricing refers to selling products or services based on the fluctuation of time, demand, and market factors. It increases or decreases the prices based upon such factors. It typically sets the prices that customers are ready to pay at that time. Generally, industries, including hotels, airlines, and event venues, utilize this pricing strategy in marketing.
5. Competition-Based Pricing
Competition-based pricing can also be called Competitor-based pricing. It refers to setting up the prices based on what your market competitors currently charge. It helps the brands set a price that allows them to compete in the market. It doesn’t require the cost of the products or services. Generally, it is utilized by brands that compete in a saturated market.
6. Cost-Plus Pricing
Cost-plus pricing refers to first considering the cost of production and then adding a fixed percentage of profit. It will help you set up a selling price more significant than your cost price. It is generally utilized by retailers to sell physical products. However, it can only be used by service-based or SaaS companies if they have a much higher value.
7. Penetration Pricing
Penetration pricing is a pricing management strategy where new companies enter a market with the lowest possible price. They try to snatch the centre of attention from the other higher-priced competitors. It helps new businesses to set up their brand image and customer base in the competitive market. You can continue at the lowest price for all time. Thus, you must build a loyal customer base in the initial phase with quality products and services. Then, you will have a good customer base even after increasing the prices.
8. Value-Based Pricing
Value-based pricing is the pricing strategy based on what customers are ready to pay. It helps the company to boost customer loyalty. You have to keep your prices solely based on the interest of customers. They might also be changed with time, and you have to mold your prices according to them. It would help if you also tried to provide the best possible quality.
9. Skimming Pricing
Skimming price refers to taking the benefits of a new and trending product that is not readily available in the market. Here you charge the highest possible price in the beginning and then gradually reduce the price. You reduce the price when a product loses its popularity. Generally, products, including video games, smartphones, and cars, generally utilize this pricing strategy. People mostly purchase at high prices to get the product first.
10. Project-Based Pricing
Project-based pricing refers to charging a single price in exchange for your service. Freelancers, contractors, and consultants generally use it. You set the amount based on the value you add to the client’s work. In this pricing management strategy, you get the payment after the completion of the project.
Pricing Strategy Examples
There are various pricing strategy examples, and we have mentioned several pricing strategies with examples in this section. It will give you everything you need to learn from an existing business about an established brand.
Example #1: Apple
Apple is one of the best examples of a premium pricing strategy. They have set up their brand image as a premium and industry leader in the market. And they are highly profitable and the biggest company in the world even after charging higher prices.
Example #2: Netflix
Netflix is a befitting example of penetration pricing. They started their services with a free subscription for the first month and had the lowest prices initially. After a certain period, they have added more quality content to their platform. They gradually increased the price after that.
Example #3: Shopify
Shopify is one of the best examples of a competitive pricing strategy. They have various unique features that help online ecommerce stores to stand out in a competitive market. At this point, Shopify charges equal to or lower than its competitors.
Example #4: Gasoline
Gasoline is one of the perfect examples of geographic pricing, as they have different prices for all the towns, cities, and countries worldwide. You will see the price difference based on the city’s economic value.
Pricing management is one of the essential factors that decide your brand’s success. It allows you to opt for the pricing strategy that is most fitting for your business. It will help if you choose the prices based on the goal of your business. We hope you like the guide and that it has helped you understand all the required factors regarding pricing management in a company.