Decreasing the prices of your products and services to stay afloat can never be a long-term strategy. Businesses might feel that reducing prices are best when it comes to staying competitive and growing a consumer base. However, there are many other factors, which they do not take into consideration.
In this article, we will look at how pricing rules work. We will also help business owners with important tips and tricks of setting their prices. In addition, we will take a close look at how automated technology and software can help businesses set the right pricing.
However, before we begin, it is important to discuss why a pricing strategy is so important for any business.
Why should Businesses pay close attention to Pricing rules?
Every business in order to succeed should always have a long term pricing strategy. IN other words, when you are starting out the business, there should be a different rule. When you have established the business, it should become something else.
Based on the nature of resources, the volume of business, the growth projections, competitor analysis and so on, pricing rules vary. It depends on many factors. Following a pre-decided pricing strategy helps in maintaining order, cohesion and frequent chipping and chopping around.
The best pricing rules guarantee that your business is successful and works according to a set plan. If you are a business owner, you should pay attention to the next section, where we outline the important things to note before setting prices for your products.
5 Things to note before Setting Prices for your Products
1. Understand the Pricing Strategy of your Competitors:
Before you decide on the pricing for your products and services, it is important to do an assessment of what your competitors are doing. This means researching, setting price points, identifying their strategies, and conducting surveys.
This is going to give you a good idea of not only their prices but why are they fixing their prices in such a way. Once you have the lay of the land, you can sit down with your team and see how you can proceed.
2. Create the Buyer’s Persona for the Brand:
Most brands forget that creating the buyer’s persona is at the very foundation of an effective pricing strategy. It means identifying who the buyer is, demographics, job profile, gender, financial position and so on.
It is important to study these factors extensively before fixing the pricing. A pricing rule should always be based on the personality and the purchasing power of the buyer. Every communication that will go out of the brand will be informed by the buyer’s personality.
3. What is your business and what kind of an industry you are in:
No industry niche can have a uniform pricing structure. If you are manufacturing apparel, your pricing structure cannot be the same as someone growing organic food products. This means that understanding your business and industry is of vital importance.
It is essential that you take into consideration the buying cycle, storage, warehousing, and other expenditures into account. This will help you come to a cumulative analysis regarding your pricing rules. You also need to be aware of what your competitors in the industry are doing.
4. Set Goals for your Business:
Defining what your primary aim is and setting goals will dictate the kind of pricing rules you need to follow. What is your immediate short-term goal- is it profits, branding or just visibility in the market. How about your long-term goal- is it about establishing a monopoly or being a market leader.
The above-mentioned goals are going to be dictated by the resources at your disposal, investments, angel funding and a host of other variables. Try to answer these questions before you proceed to fix the pricing strategy.
5. Run a Beta Test or an Experiment to garner further Information:
Every successful product launch is always preceded by beta testing. This involves displaying the entire experience of the product (including pricing) to a small set of your audience. You might have noticed how food brands use supermarkets and hyper stores to launch new products to consumers- ‘Tasting’!
This is very important as the feedback helps in improving the product, the experience and the value of your brand. Beta testing a complete product will help you decide on the final pricing strategy. If you get a great response from the test group, you can launch it at a higher price than you expected.
There are countless strategies, spreadsheets, and experiments, which go into fixing the right pricing rules. Fortunately, technological advancements have made it possible to automate the complete process. This is helping brands accelerate product launches and improve their revenue margins. For brands looking to take the next leap in terms of their business, smart software solutions that can help in setting up pricing rules are a boon.