Thursday, December 1, 2011
The ABC's of Pricing Strategy
Do you have a pricing strategy in place and if the answer is no, why not? Can you honestly say business is booming most of the time? If most of us are honest with ourselves the answer would be no. First of all, we ask, what is a pricing strategy and does such a thing even matter? With so many so-called experts emerging on every topic each day, it's hard to separate the truth from the trick. The easy answer however, is that having a strategic approach to pricing might just be the cash cow your business has been waiting for.
You must know your customers, what makes them tick, what are the hidden feelings your product will speak to, and what triggers the consumer to buy.
What a pricing strategy is first and foremost is simply a new way of thinking about price, in order to maximize on buying opportunities. Wouldn't it be great, if you understood the far reaching implications of having just the right price margins that increases your ability to compete in a fickle market? If the way you are pricing your goods and services is not working for you currently, then you certainly should embrace this new way of doing business.
The old story of doing business reads like this: A business owner looks at his/her overall expenses, feels that he/she can get by with a markup of say, 20%; and in some nebulous way comes up with a price that would render a small profit to keep the business afloat. Truth is most of these business stories ends a year or two after opening their company doors.
Notwithstanding, a few business owners do survive without having pricing strategies in place... so why change now? Well it has worked for some, but not really, that is if you measure success on the barometer of competitors who do more than survive. What companies are beginning to realize is that the rhythm of their business is in large part determined by pricing strategies that make sense.
Great pricing strategies are determined by factors such as the tenor of the market but more so a having a comprehensive understanding of consumer behavior.
The benefit of embracing a thought-out pricing strategy, is that it pays special attention to consumers, addressing questions like their willingness to buy and how inclined they would be to pay a certain price for goods or services. Coming up with an approach that works for your consumer base would employ an understanding of market trends, as well as consumer/buyer behaviors. Getting an expert in this field can help you define and market to your consumer base.
While the term, to some, is complex, this is invaluable knowledge for those willing to learn. Truth is, for businesses to truly succeed, we must discard the old method of determining how much to charge for a product or a service. We must start to think in terms of maximum sustainability instead of simply surviving. Lastly, build relationships with professionals who can help us design the right pricing strategy for our business model - then we can sit back and watch our business succeed.
I have been in the pricing strategy industry for years and enjoy writing about things I have learned along the way. Hopefully, some of you can get a quick lesson from my articles.