To create a pricing strategy, you need to do in-depth research, consideration and calculations.
You can't set prices based solely on the company's wants or needs. There are various important factors and ways to determine prices.
The following is a complete explanation of pricing strategies.
What Is a Pricing Strategy?
Pricing strategy is a method of determining the best price for a product or service.
According to HubSpot, this strategy must be based on many things, such as:
- company business strategy
- target consumers
- needs of potential consumers
- prices offered by competitors
- current market or economic conditions
Pricing Strategy Objectives
Pricing strategy is not just about finding and determining a number. There are various goals or targets that will be achieved.
Attract consumers' attention
Quoted from Indeed, the price of a product will influence consumers' views and opinions. Later, they will compare your product and competitors.
Meet consumer expectations
In connection with the previous point, the process of comparing the prices of your product and competitors will answer; Is the price commensurate with the product's values?
Shows the value of a product
The more expensive it is, the better it is, or vice versa. Functional values ​​and what makes your product superior compared to competitors.
Determining company profits
The pricing strategy must refer to the income and profits obtained by the company. This strategy must be able to answer whether consumers like it and become loyal buyers.
Determining Factors of Pricing Strategy
The pricing strategy you create must be flexible to ensure consumer needs are met and company growth is guaranteed.
Here are some important factors in making it:
Economic conditions
Many businesses have to think twice when economic conditions decline. Decreased purchasing power is also included in this. An example is when consumers who are in weak economic times will prefer cheaper products.
So, an example of a pricing strategy that you use is focusing on profits and not considering price. So, if you are reluctant to reduce prices or make adjustments, consumers will choose competing products or services with similar quality but more affordable prices.
Market needs
Economic conditions will certainly influence market needs. Consumers who previously could buy your products or services every day, may suddenly become once a week or even not at all.
Apart from that, changes in consumer habits and needs can also be a factor in changing market conditions. For example, you only sell one soap product, but there are many competitors with lower prices.
So, an example of a pricing strategy that you must implement is flexibility and a willingness to adapt. You can create new products such as affordable shampoo with quality and competitive prices.
Company revenue and profit targets
Of course, your company wants to maximize profits from a product. So, in the strategy it must be clear what your sales goals are.
If you want income in a short time, then examples of pricing strategies that you can use are discounts and bundle promos.
Meanwhile, if you want long-term profits, then the example pricing strategy you create must prioritize consumer needs with the main aim of getting loyal consumers.
Who are your competitors?
You can carry out in-depth analysis and research regarding companies or brands that sell similar products.
Make sure that in your research the following questions are answered:
- What prices do competitors set?
- What is the attractiveness of competitors?
- What kind of products and services do competitors offer?
- What is the position of competitors in the market today?
- What things can attract consumers' attention?
The value of the product or service
Surely you have heard the term "There is a price, there is an item". This term can be interpreted as if a product or service is expensive, then the quality must be good. But it is not always true.
So, the value that your product or service offers can influence consumers' opinions and views of the brand. You can be known as a company that offers affordable products with high quality.
Applicable regulations and consumer demographics
Make sure you follow the trade regulations that apply in Indonesia. You must also be able to meet the conditions required according to applicable regulations to create loyal consumers.
You can also create a pricing strategy based on the demographics of potential consumers. Make sure you map their age, place of residence, educational background, and type of work.
How to Set Prices
It's better not to immediately think about the number that will be the price of your product or service. To determine the price of a product or service, according to Shopify, you must have the following three foundations.
Determine the sales unit
Value metrics will determine the sales units of your product. For example, what is the price of your product per product, per box, per 100 boxes, or a special price for loyal consumers later.
This sales unit is important so that you don't set the same price for personal consumers, wholesalers or other companies. Another reason is that you can determine how much revenue and profit target you want to achieve.
Determining consumer profiles
As mentioned above, consumer habits, needs and demographics are very important in determining prices.
Make sure you create a complete and detailed profile regarding your target consumers. Also make sure the profile is in quantitative form (numbers).
You can record or target how many target consumers are in the profile you have created.
Examples of profiles in pricing strategies are:
- Consumer profile A (high potential)
- Age: 25-35 years
- Gender: Female (80%) and Male (20%)
- Location of residence: Jabodetabek, Surabaya, Makassar, Medan, Bali
- Occupation: private employee, civil servant, and business owner
Estimated number of potential consumers:
- Jabodetabek: 1 million
- Surabaya: 750 thousand
- Makassar: 100 thousand
- Bali: 100 thousand
Conduct in-depth research and experiments
After you have value metrics and consumer profiles, it's time for you to do in-depth research on market conditions, consumer spending habits, and competitor analysis.
Don't forget to experiment with prices. With a flexible pricing strategy, you can change prices and sales units. Also analyze the results of your experiments, to gain insight and new values ​​regarding the product.
The right and appropriate pricing strategy will help your product become more valuable in the eyes of consumers. After that, you will get loyal consumers who will of course support your income and profits.
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