As a small business, your success is dependent on various factors. These can range from the very products and services the company offers, to the customer base, to the market trends, and of course how well your company operates. One factor that can play a huge part in the success of the company though, is how you choose to price your products and services.
Prices aren’t something that you can just grab out of the air and hope they seem reasonable; rather, your company should have an effective and robust pricing strategy in place. To help ensure you’re using the best pricing strategies out there, here’s a look at some of the top strategies for small businesses to use.
This kind of strategy works well when you specialise in accessory items. The idea is that you sell just one item at a discounted rate, and you then make your profit when the customer purchases the accessories that go along with it. One of the best examples out there is computer printers. These tend to sell at a reasonable price, and then it’s the accessories such as ink cartridges and paper that yield higher profits.
Value pricing can be another potential pricing strategy for your small business. This one relies on a low production cost to allow for low prices. Keep in mind that because of the very small profit margins, this one can only be successful if you have a massive amount of sales.
This type of model works well for new businesses or those that are offering a brand-new product on the market. The idea is to use an initial price that is described as “introductory pricing” to capture the attention of customers, create buzz, and get into the market quickly. You can then raise the price after the specified amount of time.
For businesses that specialize in higher-end items that come with a traditionally high-ticket price, premium pricing is often the model used. Because you aren’t selling a large volume of inventory, the profit margin needs to be big.
Bundle pricing is another popular strategy for companies that offer a variety of products and services that are meant to be used in conjunction with one another. The idea is that the more products or services the customer signs up for, the better the discount will be. Cable companies and mobile phone service providers are notorious for this pricing model.
Then there is competition pricing, where you are simply setting the price to match that of your competition. The goal is that you will find other ways for your product to stand out and create its own following.
Finally, we have skimming pricing, where the market will be dictating the pricing. The idea is that a company uses a higher price point when the market sees fit, and it will be lowered as the market dictates.
Choose the Strategy Wisely
It’s a good idea to do your research on the various pricing strategies to ensure you choose the ideal option that will give your small business the results you’re after.