Pricing Strategies

Pricing is a really important aspect of a business and is a crucial component of the marketing mix. The right pricing can help you achieve greater sales and greater profitability, whereas poor pricing can leave your products failing to sell or even to sell too cheaply. I created this website to explain some of the main pricing strategies, how they work and their advantages and disadvantages. Economic conditions are difficult so it is vital to get your pricing strategy right, and I hope my website can help you with that.

Each strategy that I mention will be explained thoroughly and will be illustrated by a simple example which will hopefully aid your understanding. I will also make some of my own comments on the positives and negatives of each strategy and their relative suitability for different businesses.

The Importance of Pricing 

I briefly touched on the importance of pricing earlier, but I need to go into more detail as it really is a vital area of business. All around the world marketing experts are constantly evaluating the best pricing strategies for their particular product in order to improve their bottom line. However not every product or service requires the same pricing, so different pricing strategies have developed over the years. To illustrate my point about the needs of different businesses to use different pricing methods lets use an example, in this case let us take a bottom end fashion retailer and a high end fashion house. Both of these companies sell handbags, but their pricing strategies are very different. The bottom end fashion retailer offers affordable goods to a mass market, and so it will simply rely on selling its handbags for a price a certain number of percentage points above which it gets them for. The fashion house on the other hand has its brand power and exclusivity to think about, so instead it will use a pricing strategy that revolves around people’s perceptions of luxury. This is not to say that one strategy is necessarily better than the other, but it indicates that different businesses are suited to different pricing strategies.

Continuing with the same example, let us imagine the consequences of picking a poor pricing strategy. Let us imagine that bottom end fashion retailer looked at the fashion house's prices and thought that they were selling too cheaply and tried to match them. It is very likely that their sales would fall as their bags are unlikely to be of the same quality as their competitors and they do not have the same brand power. Equally on the other side of the coin, imagine the fashion house decided that they were going to match the mass retailers price- the likely result would be mass sales and little in the way of profitability and serious long term damage to the fashion house's brand, as it would no longer hold the same connotations of exclusivity and wealth.
This simple example illustrates the importance of pricing strategies and the strengths and weaknesses that different strategies have for different products and businesses. I hope that by reading some of my pages that you can find a pricing strategy that is successful for your business.

pricing models

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