Marketing pricing strategies

Marketing pricing strategies are designed to maximize profit by setting a price for your products that is fair both to you and to your customers. Prices vary with time, market fluctuations, the seasons and the economic situation of the population. Since a final price cannot be maintained forever, prices must be set according to strategies adapted to the moment, product or clientele. Below, we explain the basics for success.

The Basics of Marketing Pricing Strategies

• The higher the price, the lower the demand. This is the basic principle of marketing pricing strategies: the more expensive something is, the fewer people are willing or able to pay for it. On the other hand, a lower price is affordable for more people.
• You have to find the right price, or balanced price. To succeed in your sales, you need to find a price that is low enough for the customer to pay, lets you get the most profit out of it and keeps competition fair. Be careful not to cut the price too much, as this can also generate distrust.
• Use more than one strategy to avoid getting stuck. There are many variables to take into account in a price: supply, demand, production costs, taxes... and even if you have in mind a price that customers can remember and that catches their attention, it is not possible.
• Building customer loyalty is always the best option. Getting a customer to buy our products again is like making use of renewable energy. Even better, because through word of mouth, that person will also do priceless marketing.

3 Marketing Pricing Strategies That Work:

To better understand each type of strategy, we will illustrate each explanation with a clear example, since we are all consumers and these strategies have affected us, for better or for worse.

Pricing relative to the competition

One of the cornerstones of marketing is analyzing the competition in order to outdo it. When it comes to prices, the ideal may be the opposite. There are three ways to set prices once you know what your competitors charge for their products:

• Offer a lower price. It is attractive to customers and can win you a large number of them: not only new ones, as it also builds their loyalty to our company and gets them to leave the competition behind.
• Offer a higher price. In this case, emphasis should be placed on the extra benefits and differentiators that exist between the products of different companies. Customers must know that they are paying more, but that it is worth it.
• Average price. An average price would be similar or equal to that of the rest of the brands in our market niche. Matching prices leaves the decision to buy from our brand or the competition in the customer's hands. It is a good option if we believe this achieves maximum profitability, because offering a lower price would mean losses. The marketing strategy would have to be stronger in other ways.

It is one of the most implemented marketing pricing strategies because market niches have a limited number of buyers to be shared among all companies.

Prices set by neuromarketing

It is one of the oldest strategies, but it still works and that is why it is still used. There are two ways to apply it:

• High prices, so that potential customers assume the quality must be good. The most famous clothing brands apply this successfully, since the difference in product quality between them and mid-range brands is very small. The only thing that increases is the price for wearing that specific brand, which is why they have high profit margins. People assume that the brand is good, and the psychological effect is very strong, especially at a collective level.
• Prices rounded to 95 or 99 cents. Either of these two variants is viable, although the one that rounds the price to 99 cents is usually used, since it earns 4 cents more than the other while applying the same concept. If a product is priced at €19.99, the customer will think that it is much cheaper than if it costs €20.00. That one-cent difference makes the price seem closer to 10 than to 20, because you don't see that first 2 on the price tag.

At idnovate, we offer you a module for web price management. This will make it easier to round both the price of the products and the shipping costs, do it by category, only with certain currencies or on discounts. It makes applying marketing pricing strategies remarkably easy.

Dynamic pricing strategy

If you are going to use this way of pricing items on a website, ideally, customers should know from the start that it works this way. Customers will better understand the changes and accept the terms on which they change. With this strategy you can get more profit from something that could have a fixed price.

Customers validate these changes by accepting any of the prices. They may choose convenience over spending more money or vice versa. Having this choice helps the customer know that they are paying a fair price for a service.