How to set the right pricing strategy
by Meredith Wood
We’ve seen it time and time again: Great business ideas that flop. More often than not, businesses failures are chalked up to a lack of demand. The market can’t connect. And while that is often true, is it possible there’s something else going on?
Looking at the pricing strategies of successful companies large and small, something interesting emerges: Price has a tremendous impact on success. Choosing just the right price for your product can actually make the difference between failure and fortune.
Take for example, the case of the number 9. It’s at the end of every price, and that’s because studies have shown odd numbers increase sales by 27% percent. This works for two reasons: odd numbers draw attention, and it makes the overall price seem like a better deal. The difference is marginal, but the impact is huge.
It’s likely you can name at least three Starbucks in your vicinity right now. That’s not just the caffeine addiction talking — that’s an intelligent pricing strategy at work. Starbucks employs value-added pricing. They charge customers not just for the cost plus profit, they charge for the value they provide. They long ago figured out the absolute maximum someone would pay for a reliably good latte, and have grown exponentially for this.
How do companies apply similar principles on a large scale? Through different pricing strategies. Armed with thorough knowledge about your competition, audience, and expenses, they can craft a pricing strategy that opens new markets or maximize their share. They can increase their prices to reach a whole new audience in a luxury space. Choosing the right pricing strategy is a powerful way fund, as well as brand, your business.
To learn how to apply the right pricing strategies for your business, check out this infographic below:
Image credit: Header photo in the Creative Commons (under an Attribution 2.0 Generic license), courtesy of Tracy. Infographic courtesy of Fundera.
