There are many ways you can use this pricing strategy in your own business. How you can use competitive pricing in your own business: Example of competitive pricing: McDonald’s and Burger Kingįranchises like McDonald’s and Burger King have similar value menus, which offers a great example of competitive (and profitable) pricing in the fast-food industry. Of course, you must take into account your own costs so as to avoid underpricing your products. With that information in hand, you can then decide whether to stay at the same level OR if you can go below their base prices. Regardless of any other pricing strategy that you might employ, competitive pricing will allow you to compete with other businesses with a similar cost structure and lower your customer churn.įor this to work, first you need to make a survey of the way your competitors price their products and then calculate the mean or average. If you create online courses to sell in your business, This is just one example, but the strategy works for all types of businesses across all industries.īest for: All types of small to medium businessesĬompetitive pricing is a general pricing strategy that any business can use to sell its products or services in a competitive and profitable way. How you can use penetration pricing in your own business: It means that the people who are serious about building a business online will be willing to continue the service uninterrupted at the new price. When you sign up for their hosting services, the price is dramatically reduced, but when you renew after a year, you pay the real price, as in the image above. As a subscription hosting service, businesses like HostGator are able to make the most of X as a pricing strategy. Web hosting services are among the most common examples of this concept at work. Example of penetration pricing: HostGator The idea behind this is that by the time the company raises the price, the customer is so used to the product or service that they are willing to continue using it at its full price. This pricing strategy is different from price skimming in that the price is set very low as a way to quickly gain market share. If you are a small to medium business owner in the retail business with a new product to offer, this would be a great strategy to help you maximize your profits and revenue before competitors catch up.īest for: New businesses that want to gain market share quickly How you can use price skimming in your own business: The interesting thing about this is that by the time the price drops, many people have already signed up for a loan from their phone provider to pay installments for the phone. Their iPhone sales are always priced a lot higher when the phones first come out.įor instance, a phone might cost $649 when it comes out, and then a few months later, users could find it for just $210. Apple works hard to ensure their new products are sold for top-dollar prices. Example of price skimming: AppleĪpple is a popular example of a brand that uses price skimming as an effective and profitable pricing strategy. This strategy ensures that profit margins, in the beginning, are significantly higher in order to get back R&D and marketing costs. Since this is a brand new product that customers aren’t familiar with, they have no idea how to evaluate it properly.īut, once competitors enter the picture, the market catches up with that product or service and the price will then come down to its real market value. The strategy involves setting the price of the product or service considerably higher than its actual value. Price skimming is a popular pricing method for new businesses. To help you make the right choice, below I’ve listed six pricing strategies in marketing to consider for your small business.īest for: Businesses introducing brand new products or services The price you choose is how you translate the value of your product or service into cash.Īnd the pricing strategies outlined in this article will help you tap into your market, meet your overhead, and boost your bottom line.īut, getting the pricing right isn’t just a matter of picking the first strategy you see.ĭifferent pricing strategies may apply depending on what business stage you’re in. That’s why it’s important for small business owners to consider different pricing strategies. Pricing is a major factor when customers make purchasing decisions. 6 pricing strategies in marketing to consider for your small business
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