When determining the price of a product or a service we talk about using pricing strategies. What is pricing strategy and why do we need to know about it? Moreover, what different tools marketers can use when defining the price of a product or service?
When you are asked to design the marketing mix of a product or service, you need to make decisions on at least four core elements also known as the 4Ps (Product, Place, Price, Promotion). First of any issues concerning the product would include packaging and all other elements in connection with the products. Secondly, a decision on price. Thirdly, you will need to decide on the choice of place thorough which channels will you distribute the product or service. Lastly, you will also need to decide what promotional activities will you carry out to tell your customers about your product and encourage them to buy. If you’re dealing with an offering that is better described as a service or perhaps a product that includes large elements of service, we might also want to look at the additional elements concerning the product such as the people that are involved in delivering the service or product and the process that our customers will go through to receive our product or service.
There are many reasons why charging the right price matters to the success of the business. We need to make sure that the price makes sense to our chosen target audience. The price needs to correspond to the way we have positioned the business in the customers’ minds. If your business is offering high-quality products or services, it would send a wrong signal if the charging prices are very low. Therefore, charging a price that doesn’t correspond with the way we have positioned the products would leave our customer’s confused.
As marketers, we have different tools and theories to guide us when determining the price. However, you can always pick a product that is comparable to yours and find out what the customers pay for it. Find all of the ways that your product is different from the comparable product and always make sure the value to the customer is higher than your costs so you can obtain a good margin. If there is an already established market in your business industry, the current price range will help you to know more about the customers’ price expectations.