Know Your Price. Pricing Policy and Company Strategy
Pricing is an important part of marketing. It sets prices for goods, services in the region, sales volume (wholesale or retail), etc. Each business or entrepreneur deliberately (and sometimes unconsciously) sets its value in one way or another.
The price is one of the factors based on which buyers make a purchase decision. Therefore, pricing should always be considered in the context of the supply, market situation, and other factors.
What does the pricing policy include?
- Determination of prices (pricing) of goods and services;
- Price trends, changes in value over time - preliminary, seasonal prices, sales, discounts, etc.;
- Causes of price changes - what are the strategic goals to be achieved?
A successful pricing policy must have a specific goal that the company wants to achieve. One side. It is worth noticing that the wrong pricing policy can lead to the loss of customers.
Popular pricing targets:
➠ Market entry. If a business wants to enter the market, it must be able to determine the correct price that customers will accept in the future.
➠ Desire to confidently master the market share. Goal: to attract as many customers as possible.
➠ Trying to win the competition. Sell successfully at prices that others cannot compete with.
➠ Profit maximization. Achieve maximum profit, i.e. sell at a high mark-up to many people (can be used in high demand conditions).
➠ Avoid losing market share. Keep prices at the level of competitors.
➠ Setting prices lower than competitors. Thus, increase your sales and increase your market share.
➠ Survival. Reduce or stop falling sales, usually by using lower prices than competitors.
One of the most important steps for a successful business is choosing a strategy. While there are many pricing strategies out there, some options are more effective for one type of business than another.
The first step to choosing the perfect pricing strategy is to set goals.
The chosen strategy can benefit or destroy your business, as the price of a product or service directly affects the company's profits. Therefore, it is very important to decide which of the options will help you the best to achieve your business goals.
Use the following points: do you want to maximize temporary or long-term profits, make market stabilization, increase market share?
Once you can choose your goal, you can begin to identify the pricing strategy that best complements your product or service.
Strategic approaches fall broadly into three categories:
★ cost-based pricing,
★ pricing based on competition,
★ pricing based on value.
But there are additional pricing options such as mark-up pricing, ROI pricing, customer value pricing, competitive pricing.
The choice of strategy depends on the expectations and behavior of buyers, the strategy of competitors, and industry changes.
Other factors that influence the nature of a pricing strategy are corporate image, geography, and price sensitivity. Future trends in pricing policy are likely to establish the ability to respond to changing market conditions and greater flexibility in pricing.
Thus, pricing is an important factor used in a competitive trade environment. With the help of the strategy, various factors should be used: the influence of the market, the existing corresponding goal. Price should maximize sales and profits; this is the key to winning the competition.