Research and analysis to ensure your products are priced competitively.
Determining how your products will be priced is critical to ensuring your customers will continue to buy from your company. To understand how to price your products/services, it is important to understand the perceived value that those products/service provide to the end buyer. For new products, it is important to understand your market position and competitive products to set a price that will capture the attention of potential customers.
Pricing Strategy Examples:
If you are entering a new marketplace with your product, you will want to do research to ensure that you are pricing your product at a lowered price point to ensure your product will capture the attention of prospective customers. Entering the marketplace like this may also require you to price your products a little lower than the market allows. Once you have established your brand in a newer marketplace, it is easier to raise your prices slowly over time in order to gain back the profits you might have lost in the initial product launch.
Another pricing strategy is to price your products at higher price points in order to drive the perceived value of your product. Customers who perceive a product to be a higher quality item will often pay the higher price more frequently and consistently, as their persona becomes associated with the product brand and the perceived value it represents.
Researching Pricing Methodology:
If you are bringing a new product to the market, you will want to research that market to ensure that your product or service will actually meet the needs of the consumers in the marketplace. If a particular market is oversaturated, for example, the beverage industry, it may be more difficult to enter that marketplace with a new product or service that will stand out against the competition.
If you find that your product will uphold itself in the marketplace, you will want to research the prices of your top 5 and bottom 5 competitors before pricing your product. It will be important that you hit the market strong so customers notice you, thus using a lowered price point will help you do that.
As your product develops its brand in the marketplace, and becomes recognizable to the consumers in that marketplace, it will take on a life of its own, which can drive its perceived value to a higher level. It is important to not only understand who your competitors are at this point, but also to continue to invest in market research and product strategy to ensure your price point continues to exemplify your brand. Your customers, who often associate themselves with your brand, will pay the higher price point for your products as long as they remain fresh and cutting edge.
Take Nike as an example. Nike products are higher priced, but Nike has done a great job of driving the perceived value of their products over the years through multi-product branding. Consumers can find everything from running shoes to soccer gear to eyeglasses with the Nike brand. Nike has a higher level of consumers who have associated themselves with the brand, and will pay the higher price point to own something with the Nike Swoosh on it.
Pricing strategy boils down to understanding your products, understanding your competition, and determining which price point is best for your product, as well as how you intend to market the product. The better understanding you have about the marketplace and how your product will be accepted, the more likely you will be with successful pricing strategy for your product.