Product pricing strategies is a crucial questions any CEO will repeatedly face during the life cycle of the company. Product pricing ultimately defines the product positioning in the market. Pricing strategy is an integral part of the marketing strategy. Pricing is a continuous process and it becomes applicable in following cases
- Existing products but new geographies – New geographies allow the scope for creating a new pricing strategy due to market , demographics, competition, social impact.
- Repackaged products – This is essentially re positioning by virtue of adding new features or innovations.
- New products – Complete re positioning the product
- Re branded products – This is more of a marketing tactic.
- Existing products with new features – This is an attempt to change the product category in the market either based on new product features or
Each of the above situation requires a precise product pricing strategy. Any wrong move on here will make the product push very difficult.
Key factors determining product pricing strategies
- Existing similar products available in market – Existing product prices always put you on a defensive strategy. Customers always react very sharply to over priced product when they have the options available.
- Competition product pricing – If competitive products are already existent in the market then it becomes a bench mark pricing unless your product has a differentiation.
- Demographics of the market – Customer social strata, knowledge level, income levels, development of market place , infrastructure are some of the key elements in defining the pricing strategy.
- Branding enjoyed by the product – If your brand is already established then it certainly helps you to get certain premium pricing.
8 Key elements of successful pricing strategy.
- Multiple models of pricing need to be tested before finalizing the final pricing. Product price testing is very important to gauge the market sentiment.
- Pricing need not be in comparison with competition if you have a product differentiation. Bench marking against competition affects the product positioning in the market and should be avoided.
- Promotional pricing strategy is quite delicate. Temptation to offer direct discounts for early sales should be avoided. Instead introductory discounts can be offered out of final pricing.
- Price for the same product should not be different in same geography. Customers are very well connected and price differentiation for the same product adversely effects the branding.
- Different pricing strategies can be introduced for different product segments. Price differentiation is best achieved by pricing the features separately which leaves the room for future price increase based on the future enhancements.
- Product pricing should not be changed too frequently otherwise customer loses the confidence on the brand.
- Product price should not be discounted due to sales push otherwise it becomes a vicious circle.