Your best pricing strategy: 7 examples to maximize your profits.

7 best pricing strategy examples · 1. Price skimming · 2. Penetration pricing · 3. Competitive pricing · 4. Premium pricing · 5. Loss leader pricing · 6. SkiptocontentPodiumCollectandmanageonlinereviewsforbusinessProductsReviewsInboxPaymentsWebchatVideochatSurveysCampaignsTeamchatInterestedintryingourfreeversion?SolutionsSingleLocationEnterpriseByIndustryAutoRetailHealthcareHomeServicesFinancialServicesProfessionalServicesDentalEntertainmentByRoleSales&MarketingOperationsCustomerExperienceExecutivePartnersResourcesArticlesCustomerStoriesEbooksByIndustryAutoRetailHealthcareHomeServicesFinancialServicesDentalEntertainmentByTopicLocalMarketingLeadGenerationCustomerExperienceOnlineReviewsFacebookReviewsGoogleReviewsDigitalTransformationLoginHomeArticlePodiumforRetailersYourbestpricingstrategy:7examplestomaximizeyourprofits.PodiumforRetailersYourbestpricingstrategy:7examplestomaximizeyourprofits.Makesureyourpricingstrategydrivesbuyerstochooseyourproduct.Herearesevenstrategiestotryandhowtoimplementthem.Share:Makingsurethepriceisrightforyourproductsorservicestakesmorethanaguess.Nomatterwhatyou’reselling,thepriceyousetforyourproductorservicecanmakeorbreakyourcompany’sfinancialgoals.Ofcourse,therightpricewon’tjustcometoyouovernight.Athoroughpricingstrategyisamustwhenyouwantyourcustomerstobuy,withoutsacrificingagreatprofitmargin.There’snouniversalanswerforhowhighyourmarkupshouldbe.Somecompaniesmakemillionschargingmeredollars,whileothersmayfindsuccesswithgrosslyinflatedprices.Intheend,consumerswillonlychoosetheproductsorserviceswithpricesthatmatchtheirperceivedvalue.Sohowdoyoudeterminetheactualvalueofwhatyou’reselling,beyondproductioncosts?Withtherightpricingstrategy,you’llbeabletoaccountforallthefactorsthatimpactashopper’swillingnesstobuy.Whatisapricingstrategy?Theterm“pricingstrategy”encompassesallthemethodsthatabusinessownerusestodeterminehowmuchtochargeforaproductorservice.Inordertoputagreatstrategyintoaction,you’lltypicallyendupdoingsomemath,performingmarketresearch,orcollecting consumerinsights first.Ofcourse,noteverypricingstrategyisthorough.Somebusinessownersprefertokeepitsimplebyusingsetmarkups(sometimesknownascost-pluspricing)ormanufacturersuggestedretailprices(MSRPs).Ifyouuseanyconsistentprocesstosetyourprices,youalreadyhaveapricingstrategyinplace.However,whenyoubuildastrategythatbetteraccountsformarketconditionsandotherfactorsthatimpactconsumerbehavior,you’llbeabletotakethecompetitiveadvantageinyourindustry.​BenefitsofapricingstrategyForconsumers,havingtheabilitytocomparedifferentpricesisthe secondmostimportant benefitofpurchasingonline.Ase-commercecontinuestogrow,pricecomparisonisbecomingeasierbytheday,whichmeansconsumerswillincreasinglyseekthebestvaluetheycanfind.Havingastrongpricingstrategyinplacecanhelpyoubettermeet customerexpectations byputtingreasonbehindyourhigherorlowerprices.Yourstrategywillcreatearepeatableprocessthatencouragesyoutoconsiderhowyourtargetaudience—andperhapsevenyourcompetitors—willreacttoyourpricingdecisions.Asyourefineyourtactics,you’llbeabletoconverteventhemostprice-sensitiveshoppers.Pairedwithagreat marketingstrategy,yourpricingstrategymayevenhelpyoutransformtheperceivedvalueofyourproductsorservicesinthelongrun.7bestpricingstrategyexamplesBylearningaboutthepricingstrategiesthatotherbusinessownersareusingtoday,youcanstartbrainstorminghowyoucanusepricetoincreaseyourmarketshare.Below,we’llsharesevenpricingmethodsyoumayusetocaptureandconvertmoreleads.Asyoureadthroughtheseexamples,keepinmindthatyou’reneverlimitedtoasinglepricingstrategyinthelongterm.Manybusinessownerswillrotatestrategiesovertimeorblenddifferenttacticstogether.Sometimes,oneproductorservicewillcallforadifferentpricingstrategythananother.Allittakesisalittleexperimentationwiththefollowingtacticsbeforeyouknowexactlywhatworksforyourbusiness.1.PriceskimmingWhenyouuseapriceskimmingstrategy,you’relaunchinganewproductorserviceatahighpricepoint,beforegraduallyloweringyourpricesovertime.Thisisagreatwaytoattractconsumers—especiallyhigh-incomeshoppers—whoconsiderthemselvesearlyadoptersortrendsetters.Fromabusinessowner’sperspective,priceskimmingcanbeextremelyhelpfulinhelpingyoubreak-evenfaster.Thisstrategyprovidesanampleamountofsecurity—grantedthatyourinitialpriceisn’ttooextreme—beforemakingyourproductorservicemoreaccessibletothegreatermarket.Aslongasyou’rekeepingupwithyour onlinereputationmanagement duringtheinitialreleaseperiod,thegreatermarketwillbekeepinganeyeoutforlowerprices.Priceskimmingcanbeparticularlyusefulforbusiness-to-consumer(B2C)brandsthatrelyonfast-movingtrends.Thinkabouthowfashionretailersalmostalwayslaunchproductlinesatahigherprice,thenputthemonsaleassoonasnew,trendierclothescomein.Electronicsretailersalsofrequentlyusepriceskimming,startingwithpremiumpricingwhenphonesorlaptopswithnewfeatureslaunch.2.PenetrationpricingApenetrationpricingstrategyistheoppositeofpriceskimming.Insteadofstartingwithhighprices,youstartwithlowpricesandgraduallyincreasethemastheygaintraction.Whilethisdoesputyouatriskforlimitedorzeroprofitinthebeginning,dependingonhowlowyouactuallygo,italsoquicklyconverts.Inthesamewaythatafreesamplecanencourageacustomertomakeapurchase,you’reprovidingadiscountedexperiencetocreate customerloyalty.Penetrationpricingisdesignedtoputthespotlightonyourbrand.Becauseofthis,yourpriceswillalwaysstartlowerthanwhatyourcompetitorsarecharging.Onceyou’vesuccessfullyachievedmarketpenetration,youcanrisetoanequivalentpriceorevenhigher,dependingonhowpositiveyour customerfeedback is.3.CompetitivepricingCompetitivepricingisextremelysimilartopenetrationpricinginthatyourgoalistodriveyourtargetaudienceawayfromyourcompetitorsandtowardyourbrand.However,insteadofmakingpriceincreaseslateron,you’llcontinuetotrackwhatyourcompetitorsarechargingandbeatthemout.Manystores,likeWalmartandDick’sSportingGoods,willevenofferpricematchingtoensuretheynevermissabeat.Althoughthisstrategycanbehardtosustain—hencewhymanybusinessownersstickwithapenetrationpricingstrategy—competitivepricingcanbeusefuliflimitingproductioncostsisoneofyourstrengths.Itwillkeepprice-sensitivecustomersloyaltoyourbrandforreliablyhelpingthemstaywithinbudget.Closelyrelatedtocompetitivepricingiseconomypricing,whichreliesonlowproductioncoststokeepconsistentlylowprices,regardlessofwhatcompetitorsarecharging.4.PremiumpricingLowpricesaren’talwaysthemostattractiveoffer.Whenyourtargetaudienceseeksqualityoveragooddeal,youneedtodemonstratetheadvantagesthatyourbrandcanprovide.Apremiumpricingstrategycanhelpyoubuildtheperceivedvalueofyourproductorservice,straightfromyourinitiallaunch.Yourpricesmaydropslightlyovertime,buttheyshouldstillgiveyourbuyersafeelingofexclusivityand,inmanycases,luxury.Still,whiletheideaofpremiumpricesisoftenassociatedwithluxurybrandslikeFendiandMercedes-Benz,anybrandcantakethisapproach.Forexample,Advilalwayssetsapremiumpriceforitsproducts,evenwhengenericpainrelieversareequallyaseffective.Asaresult,manyconsumerschoosetopurchaseAdvil—andmayeventhinkitworksbetter—whenthey’rereallyjustpayingmoreforatrustedbrandname.5.LossleaderpricingManyretailers,bothonlineandoffline,attractcustomersbyofferingonemajordiscountedproductorproductlinewhileencouragingthemtopurchasemore.Theendresultisgreaterprofitforyourbusinesspertransaction.Thoughthispricingstrategyisoftenassociatedwithpromotionalpricing,whichutilizesshort-termsales,itcanbelong-term.Long-termlossleaderpricingisoftenseenintheformofbundlepricing,inwhichyouoffergreatersavingswhenconsumersbuymore.Althoughofferingdiscountsforbundlingwon’tincreaseyourprofitmarginimmediately,theideaisthatyou’llgetmoreconsistentsales,whicheventuallysurpasswhatyouwouldhavesoldbyonlypricingitemsindividually.6.PsychologicalpricingThenumbersyouseecaninfluenceyoumorethanyouthink.Insteadofchangingconsumerperceptionsaboutaproduct,psychologicalpricinguniquelyaimstochangeperceptionsaboutwhatthepriceevenisinthefirstplace.Afewcommonexamplesofthisstrategythatareproventoworkinclude:Endingapricewithanoddnumbertomakeacustomerfeellikethey’respendingmuchless($5.99insteadof$6,or97centsinsteadof$1).Thisisoftenknownascharmpricing.Usinglargerfontsizesfordollaramountsandsmallerfontsizesforcents.Pairedwithcharmpricing,youcanfurtheremphasizeacustomer’sfeelingsthatthey’repayingsignificantlyless.Placinganoriginalpricenexttoasalepricetoshowcustomershowmuchthey’resaving.Thisissometimesknownasanchorpricing.Apsychologicalpricingstrategyisbestusedforbrandsthataretargetingprice-sensitivecustomers,asitprovidesaperceiveddealthatcustomerswithanaffinityforluxurymaynotwant.7.ValuepricingValuepricingisperhapsthemostimportantpricingstrategyofall.Thistakesintoaccounthowbeneficial,high-quality,andimportantyourcustomersbelieveyourproductsorservicestobe.Valuepricingiswhatmakesaweddingdressworththousandsmorethanapromdressandwhatmakeshigh-endsalonhaircutsworthmorethanspeedyGreatClipsservices.Inordertosetvalue-basedprices,youmusthaveadeepunderstandingofyourtargetaudience’sneeds,painpoints,andmotivations,aswellasyourbrand’sownreputation.You’llalsoneedtotakeintoaccounthowthestateofthemarketaffectshowpeopleperceivevalue.Forexample,thevalueofanon-necessitylikeaNetflixsubscriptionmaydecreaseduringarecession.Whilewearehighlightingvaluepricingasitsownstrategy,wealwaysrecommendtakingvalueintoaccount,evenifit’snottheprimarymethodyou’reusing.Thiscanhelpyoudecreaseriskbyensuringyourdon’tstartwithapricethat’stoohighwhenpriceskimmingorundersellyourselfwithcompetitivepricing.NailtherightpriceWhenyouuseapricingstrategythat’swell-tailoredtoyourbusiness,youcanrestassuredthatyou’resettingpricesyourcustomerswanttosee.Usingalogicalapproachtosetthepriceofaproductorservicewillhelpyoumaximizeyourprofitsandyoursalesvolumeallatonce.Asyouconsiderthepricesthatcustomersarewillingtopayforyourbrand,rememberthatopinionscanchangeovertime.Learn howtobuildacustomerexperiencestrategy thatincreasesperceivedvaluesoyoucanupyourpricesandprofitevenmore.EricFuesselDirectorofRetail&HospitalitySalesEricFuesselisaretailprofessionalatPodium,theleadingmessagingplatformthatconnectsconsumerbusinesseswiththeircustomers.Adaptthewayyoudobusiness.Presssend.WatchDemo