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ricing is one of the four P’s which make up the Marketing Mix – and fundamental feature of a marketing strategy. A business that suffers from an inconsistent marketing mix will have a higher rate of failure compared even to less competitive but more strategic alternatives.
Business Objectives
The first step to developing a pricing strategy is to determine the business’ objectives. Is the goal survival, to make a profit for shareholders, to get a positive return on investments, to acquire market share, to maximise cash flow, to maintain the status quo, or to ensure that product quality is never compromised? Depending on the objective, the pricing strategy will be very different so it’s important that marketing aligns with the business to ensure success.
Research
Once business objectives are determined and aligned, marketers must identify the price sensitivity of their market, and the price comparison of competitors and alternative products or services. If the objective is to make a profit, but the market is price sensitive and your competitors are pricing very low, then this will affect not only which pricing strategy you employ but also your branding and the remaining P’s within your marketing mix.
Basis of Pricing
At this stage it’s important to determine what impacts your pricing the most. Is it cost, demand or competition? While all three are important to consider, establishing the primary driver will have a significant impact on the strategies most suited to your business.
Taking the example above, if cost is the primary driver yet you want to make a profit and you’re more expensive than the competition within a price sensitive market, then you will likely employ a prestige pricing strategy and align your brand accordingly.
Pricing Strategies
There are 21 common pricing strategies and typically marketers will leverage a combination of them.
The most common pricing strategies are:
- Negotiated Pricing
- Secondary-Market Pricing
- Periodic Discounting
- Random Discounting
- Price Skimming
- Penetration Pricing
- Captive Pricing
- Premium Pricing
- Bait Pricing
- Price Lining
- Reference Pricing
- Bundle Pricing
- Multiple-Unit Pricing
- Everyday Low Prices
- Odd-Even Pricing
- Customary Pricing
- Prestige Pricing
- Professional Pricing
- Price Leaders
- Special-Event Pricing
- Comparison Discounting
Whatever you decide to move forward with regarding your pricing, make sure it aligns with your brand and the rest of your business and marketing strategies.
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