Pricing is an important part of selling products and services. Select a price too high and your product sales slack while if you are too low you can increase sales but with the risk of long-term damage to the brand. Evaluating price can get complex when we consider the multiple ways pricing strategies determine value. Common evaluation include cost, comparison, and value offered. Few people think of how the channel can have a serious impact on total price. Taking into account the channel and the target you hope to reach, it is possible to further tweak your price outcomes.
Why must you have a pricing strategy?
As a business owner you want to ensure that you are putting yourself in the most lucrative spot for maximizing your wealth. All businesses evaluate the work of their offerings in some way. For small business it might be relatively simple but for large businesses it can be increasingly complex. Having some type of strategy helps you limit your own bias while improving accuracy.
How does the channel influence strategy?
The marketing channel you use should be based on our core customer demographic. First research your customer and then find your channel. The core group of purchasers within this channel will be the one who determine your value. Such customers already are interested in the product and would raise its value. The rest of society doesn't matter much if they don't make purchases. Thus, product value and customer profile and channel influence each other.
What is the value of a product?
The value of a product is its relative worth to the consumer. Its not only about money because money is only an indirect measure of value. Instead, think of value in terms of its use to the people who need it. If it has no use or is abundant (or scarce) the value will change. A products core value is more associated with its functional value while relative value is more associated with market factors.
There is no perfect way to evaluate a product. What you essentially want to answer is "what are my customers willing to pay for this product so I can earn a profit?" The low cost option isn't always the best option. At times it may make sense to raise your value through other means such as warranties and add ons.