Price is an important part of your marketing mix strategies. Prices can help or hinder the sales of your products or services. Because your product is of good quality, has the features and benefits that your buyers want and need, that it differs from your competition, that it has a good cost structure and a good and robust promotion and distribution program, its price strategy for your product or service may or may not help you sell it. Pricing strategies can have a very direct impact on your market share growth.
Four alternative pricing strategiess for your business are:
- Generic or cheap prices. This strategy treats low-price or generic brands – the value to the buyer is in the low price. Your business approach to this pricing strategy should be based on a low-cost structure, minimal features, minimal promotion, but solid (not fancy) benefits.
- Differential prices. With this strategy, you can choose to price your product differently by type of buyer (for example, retail store, online store, a department store), by geographic region (for example, the California market may have higher price than Illinois), per volume purchased (for example, a customer who buys a large volume will receive a different price than who buys a small volume), per national account segment (for example, you can negotiate a price special differential with a national account versus the price you would charge to a local account). With all these price differential, there must be a justifiable reason for the price differences.
- Premium price. This strategy is commonly used for luxury items or high value goods, such as expensive jewelry, ships, airplanes, estates, etc. Use this strategy only if the market recognizes the value of your product as a premium or luxury good.
- Prices of captive products or complementary products. This pricing strategy is also used in product line pricing. This strategy groups, and generally packages, similar products that are priced as companions (for example, a blender and a mixing bowl) and as captives (for example, pens that must have a specific refill (not generic), razors razors that can only use a specific blade, etc.). Pricing for captive or ancillary products is often based on the packaging to offer the two products in one package (for example, a test pack of blades with the razor; a refill of pen packed with the pen; or the tape replacement with the tape dispenser). Then when those blades, refills, or other add-on products are used, the price to buy new blades, refills, or other products is significantly higher than the price of the original package.
Take a deep look at your product, your buyers, your competitors (and their potential actions and reactions), and your market before deciding which pricing strategy is best suited to your business. Then review the pricing strategy by product and by product line on a regular basis to make sure the fit is still the best.