Whether you are making a purchase of a high-end item such as a laptop, car, or even of a small item such as footwear, t-shirts, the first thing that usually most of us look at is the – ‘Price’. Hence, it goes without saying that the pricing of the product is one of the most vital factor that impacts the decisions of most customers, and determine its success or failure.
More importantly, price is the only revenue-generating element in the marketing mix, while all other elements represent costs. However, many at times, marketers are seen to fail in optimally pricing their products, resultantly face losses or even hurt their brand reputation.
For example, the leading automotive brand Tata Motors launched the Nano car and labelled it as ‘the cheapest car’ with the intention to attract the lower-middle class families by offering it as an option that would fit into their budget. However, Nano did not work in the market in the long run. And, why? Well, the major reason being they overlooked the fact that in country like India a car is a status symbol, and so positioning it as a ‘cheapest car’ backfired with people not wanting to buy a car that was so obviously targeted at lower income groups. Hence, here the company lacked in reading the target customers and simply based the product assuming that lower price would deliver the best result.
So if you are planning to introduce a new product or service, or considering price changes for your existing ones, here are the key factors that you should consider for correctly pricing the product, and thereby creating a higher profit margin.
👉 Know Your Customers – The first important factor is definitely knowing what your customers want from your product / service. Contemplate on what role does pricing plays in their purchase decision such as – are they driven by the cheapest price or by the value they receive? Once you have all such information, it will help you decide if your price is right, and also if you are targeting the right market.
👉 Market Positioning – Once you understand your customer, you need to look at your market positioning. This simply means considering – what is the market in which you want to sell you product or service – high or low end market or someway in the middle. Once you have decided, you will be able to reach your ideal pricing.
👉 Competitors’ Pricing – Consider competitors’ product pricing strategy as to what are the price they are charging for their products? Or what customers are they attracting with their pricing? The answers to these questions will give you an industry benchmark for your pricing.
👉 Costs – Before you set product price, learn everything about the costs involved with running your business which includes of – Fixed Costs & Variable Costs. Your business will fail if it sells for less than cost, or if its gross profit margin is too low to cover the fixed costs of the business.
So, how do you determine your pricing? Comment Below.