How to Create a Killer Pricing Strategy

You might have the best products and services in town, but if your pricing strategy is lacking, your business will suffer. Many different factors go into a winning business strategy: you need competitive products and services, a convenient location, effective marketing, and a dynamite leadership team.

Each of these factors requires your attention, and pricing deserves focus as well, especially if you want to maximise profits and market exposure. Let’s look at how to create a killer pricing strategy.

 

Define Your Overall Business Goals

Before you can create an effective pricing strategy, you need to examine the big picture. What are your overall business goals? Your pricing strategy is an important contributor to your overall goals, so don’t jump ahead and tackle your pricing strategy first without accounting for your goals.

You may be focusing on any number of overall business goals such as the following:

• Reaching a new market
• Introducing a new line of products
• Increasing profitability
• Penetrating a specific market
• Increasing per-customer revenue
• Making gains against competitors
• Increasing prospect presence
• Growing your market share
• Improving cash flow
• Filling capacity
• Making better use of resources 

These and other overall business goals require different pricing strategies, so clearly identify your goals before you decide to make any changes to your pricing.

Conduct a Market Pricing Analysis

Instead of looking at your own pricing in a vacuum, it’s important to look at the market in which your product will compete. How much are your customers used to paying for products similar to yours? If you offer high-value, differentiated products, you may be able to get away with asking more for your products than the market seems to support, but without a thorough analysis of market pricing, you won’t know where your prices fit into the big picture.

 

Zoom In On Your Target Audience

With your overall business goals and your market pricing analysis in mind, you’re getting a nice in-depth look at the environment you’re operating in. Now you just need to focus on your target audience. 

Use existing data to figure out the perceived and real value of your products or services to the customers in your target market. What do they gain from your products and services? Why will they use your products? How will they use them? Will they buy your products for gifts? Will they purchase them during emergencies? Will they buy your products with cash on hand, or will they finance them?

 

Profile Your Competitors

Don’t forget your competitors. Before you can accurately come up with your own killer pricing strategy you need to know what you’re up against. Identify several direct competitors. If possible, list at least three. Analyse their pricing structure, and find out if they offer discounts, bundle products, or offer other incentives.

 

Create Your Killer Pricing Strategy

Armed with all of this information, you’re prepared to formulate an action plan. Based on your business goals, you may choose to create a pricing strategy that is artificially low (market penetration), promotional (one-time deals), sandwiching (high, medium, and low priced items to drive customers to medium priced items), competitive (equal to your competitors), or psychological ($0.99 instead of $1.00). 

After you have finalised your pricing strategy, revisit it on a regular basis after it’s implemented. The market environment changes, your customers change, and your products and services may change, too. Flexibility will keep your business agile, as long as you’re working toward your overall business goals.

For help with your pricing strategy, or to discuss any other business concern, contact us at Altus Financial.

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