The Truth About Marketing Part V
The Truth About Marketing Part V
The last entry in this series began a discussion on marketing mix, a.k.a. as the 4P's. In particular we discussed the first of the 4P's -- "Product". Let's now focus on the second element of the marketing mix "Price".
The last entry in this series began a discussion on marketing mix, a.k.a. as the 4P's. In particular we discussed the first of the 4P's -- "Product". Let's now focus on the second element of the marketing mix "Price".
PRICE
The price of your product or service is based on your cost to produce or provide your product or service, your associated overheads, your competitions price and what your customer will pay. Taking these factors into account, there are several strategic ways to price your product or service:
Once again, as with product, the pricing strategy for your product or service will often vary by market segment.
Until our next blog post you may wish to take some time to review each of your market segments and related product or service sets and determine which pricing strategy you are using. Is it the best one? You may be surprised by the answer.
Stay Tuned for the Truth About Marketing Part VI
The price of your product or service is based on your cost to produce or provide your product or service, your associated overheads, your competitions price and what your customer will pay. Taking these factors into account, there are several strategic ways to price your product or service:
- Premium Pricing
Is a high price based upon the uniqueness of your product or service...This type of pricing is used where a substantial competitive advantage exists. In other words, you have a product or service that No One else offers in your marketplace.
- Penetration Pricing
This type of pricing is used for products or services that are in the ‘introductory’ stage of either the product or the business. With this pricing, the prices are reduced to attract the largest customer base and can be used to discourage competitors.
- Price Skimming
This follows Penetration Pricing where the price has been below the real market price. Once the customer is established the price quickly rises to recoup costs and to allow the business to begin realizing a profit, i.e. Low-balling a contract bid in order to get the future business at a higher GP. Caution must be used with this strategy since a quick price increase can give your competitors an advantage and/or repeat customers may be affected adversely…This strategy needs to be well planned. This only works well when you wish to obtain a large percent of market share quickly, or if you wish to drive out the competition.
- Economy Pricing
This is ‘no frills’ pricing and usually applies when the cost to produce the product or service is very low and the overhead to support the business is stagnate and fixed. This also applies to businesses (Wal-Mart) where the volume of procurement allows the price to be very low. Some small businesses use this approach as a means of getting their foot in the door with the hope of leveraging into other areas of business.
- Differential Pricing
This pricing allows for the same product or service to be priced differently according to your market segmentation or by geographical area. The old saying, “What the market will bear” comes into play.The five pricing strategies listed above are the most commonly used. However, you need to be aware of other strategies that are used to price products and services. If you would like to receive more information on pricing strategies please contact me at tim.barrett@blueprintsforbiz.com
Once again, as with product, the pricing strategy for your product or service will often vary by market segment.
Until our next blog post you may wish to take some time to review each of your market segments and related product or service sets and determine which pricing strategy you are using. Is it the best one? You may be surprised by the answer.
Stay Tuned for the Truth About Marketing Part VI
Comments