How Do I Choose the Best Business Pricing Strategy?

Pricing strategy, a very important part of the marketing mix. Price is usually an important factor that affects the success or failure of a transaction, and it is also the most difficult to determine in the marketing mix. The goal of corporate pricing is to promote sales and earn profits. This requires enterprises to consider both the cost compensation and the consumer's ability to accept prices, so that the pricing strategy has the characteristics of two-way decision making between buyers and sellers. In addition, price is the most flexible factor in the marketing mix, and it can be a sensitive reflection of the market.

Pricing Strategy

Pricing Strategy,

A key component of the marketing mix.

The six common pricing strategies are:

Discount pricing, psychological pricing, differential pricing, regional pricing, portfolio pricing, new product pricing.

US Classification:

Competitive pricing,

A: Internal factors

Business marketing goals

Business marketing mix

Product cost

Pricing Strategy Competition Industry

The price form of goods and services is not only affected by value, cost, and market supply and demand, but also by the degree of market competition and market structure. Under the market structure of perfect competition or monopolistic competition, there are more producers and operators in the market. Most companies cannot control the market price. The market has a high degree of selectivity for homogeneous goods. The market information is sufficient. Responsive, in order to seize market share, companies have adopted a multi-angle response strategy and launched a price war.

Develop a price strategy based on the market life cycle of the product.

Product market life cycle can be divided into introduction period, growth period, mature period and recession period. During the introduction period, new products entered the market for the first time. Compared with older products, they have obvious advantages in terms of technical performance. However, there are disadvantages such as small batches, large costs, and publicity costs during the period of enterprise investment. Such enterprises must consider pricing decisions. The company's own competitive strength and new product technology content. If the new product has high quality and is not easy to imitate, you can choose a skimming pricing strategy, that is, a high price strategy, the product enters the market, and the investment cost is quickly recovered; if the demand for new products is elastic Larger, low prices can greatly increase sales volume, you can choose a low price, small profits but high sales price strategy, products enter the market, quickly occupy market share, in order to expand sales to achieve the purpose of increasing total profits. During the growth period, product sales increase, market competition intensifies, and the cost-effectiveness of the product still maintains its advantages. Enterprises can choose pricing strategies based on their own size and market visibility. Large-scale well-known companies can choose slightly increased price strategies and continue to obtain high prices. Small enterprises should consider the risk of price competition due to market entry, and should aim to achieve the expected profit and choose a target price strategy. In the mature period, market demand tends to be saturated, and market competition tends to become fierce. Enterprises are facing the threat of price wars. At this stage, they should choose a competitive price strategy, that is, use price reduction methods to suppress competition and maintain sales. During the recession period, products are in danger of being replaced by new products with better quality and performance. Therefore, the guiding principle for companies to choose a pricing strategy is to sell as quickly as possible to avoid backlogs. They can choose a small gradual price reduction and a smooth transition pricing strategy, supplemented by non- Pricing methods, such as gifts and rewards, are used to protect corporate profits to the greatest extent. If the product technology is highly updated, a one-time sharp price reduction strategy is selected to exit the market quickly. However, when using price reduction strategies, pay attention to whether Detrimental to the corporate image of well-known brands.

Prerequisites for choosing a pricing strategy. When choosing a pricing strategy, an enterprise should have the necessary prerequisites. Enterprises that adopt skimming pricing strategies and slightly improved pricing strategies must have high technical capabilities and advanced technology levels, and the quality of their products should reach a higher level in China. Level, and get the recognition of target customers. Most of these companies belong to capital, technology-intensive companies, or well-known companies. They are products of well-known brands. The customers they serve are middle- and high-income groups, mainly to meet consumers' high-quality life. And the psychological needs of chasing famous brands. Enterprises that adopt a competitive price strategy, especially those that launch price wars, must have a certain production scale. Generally, it is considered that the production capacity of 10% of the entire market capacity is a critical point. It will have a shocking impact on the entire market. This is also the starting point for companies to form economies of scale. When companies use competitive pricing strategies, grasping the best price timing is a crucial factor. If price wars in the industry are inevitable, it is generally Should be the first to start, the effect of fewer price reductions for starters, followers need to spend more price reductions to obtain, but the price reduction range should be compatible with the elasticity of demand for products, the elasticity of demand for products, the price reduction range can be large The loss of price reduction can be made up by increasing sales, while for products with less demand elasticity, the price reduction should be smaller to avoid excessive reduction of the total profit of the company's products; for small-scale, small market share, and labor-intensive enterprises, Under an effectively competitive market structure, follow-up pricing strategies are usually adopted, mainly by tapping its own potential to reduce This, to achieve the purpose of increasing efficiency.

Monopoly industry with pricing strategy

Monopoly industries are divided into complete monopoly market structure and oligopoly market structure.

A completely monopoly market refers to a market organization with only one enterprise in the industry. The company produces and sells goods without any similar substitutes. It is extremely difficult or impossible for any other enterprise to enter the industry. Its market excludes any competition Factors, monopoly enterprises can control and manipulate market prices. The main reasons for monopoly are government monopolies and natural monopolies, such as railway transportation, natural gas, water supply, power supply, heat supply and other sectors. The basic principle of a complete monopoly enterprise's price strategy is that marginal cost is equal to marginal revenue, and the goal of maximizing corporate profits is achieved by adjusting output and prices. Although a monopoly enterprise has the monopoly power of market prices, to formulate a scientific and reasonable product price, it is necessary to consider market demand, analyze the relationship between marginal revenue, product prices, and the elasticity coefficient of demand price. The level is slightly lower. When demand is inelastic, companies choose high-price strategies.

An oligopoly market refers to a market in which there are very few companies in the industry and there are interdependent and competitive relationships between companies. This market has a few companies producing and operating, such as the automobile manufacturing industry and the telecommunications industry. Each of them Enterprises have the ability to control the price and output of the entire market. Any company must form its own decisions based on the price strategies of other companies in the market. For example, various companies in the Chinese automotive market influence each other and reduce prices, but companies are choosing pricing strategies. When considering the chain reaction of one's own price decision to competitors, price wars often lead to the result of both losses. Therefore, the product prices of such enterprises should remain relatively stable for a certain period of time after interaction. In terms of product performance, quality, publicity and service, non-price competition is launched.

Although monopoly is not conducive to the formation of a market mechanism, from the perspective of economies of scale, the production efficiency of the exclusive operation must be better than that of multiple operations. Therefore, in the production of certain products, the monopoly operation is a mandatory method. In the pricing decision, considering the consumption needs and affordability of consumers at different levels, monopoly companies can choose different pricing strategies, provide different products and services for different consumer groups, different consumption patterns and consumption volumes, and adopt different price strategies. Such as natural gas, water, electricity, heating and other product prices, different consumer objects such as residents, commercial and government departments should be used, and different prices should be used.

New pricing strategies

(A) skimming pricing strategy

The so-called skimming pricing refers to setting the price of the product high in the early stages of the product life cycle to maximize profits.

Conditions for skimming pricing:

Pricing Strategy There are enough buyers in the market, and their demand is inelastic. Even if the price is set high, the market demand will not decrease significantly.

High prices reduce demand but do not offset the benefits of high prices.

(3) In the case of high prices, it still operates exclusively and has no competitors. The high price gives the impression that this product is a premium product.

(Two) penetration pricing strategy

The so-called penetration pricing refers to the fact that companies set the prices of their innovative products relatively low in order to attract a large number of customers and increase market share.

Conditions for penetration pricing:

Market demand is extremely price sensitive, and low prices will stimulate rapid market growth.

The production cost and operating expenses of an enterprise will decrease with the increase of production and operation experience.

(3) Low prices will not cause actual and potential competition.

(3) Satisfactory pricing strategy

Satisfactory pricing strategy is a pricing strategy between skimming pricing strategy and penetration pricing strategy. Its price is lower than the skimming price and higher than the penetration price, which is an intermediate price. This pricing strategy gets its name because it can satisfy both producers and customers. It is sometimes called "gentleman price" or "moderate price".

Pricing Strategy Portfolio

Product pricing

Optional product pricing

Required product pricing

Additional product pricing

Product bundle pricing or product family pricing

6. By-product pricing

7. Distribution pricing

8. Pricing of supplementary products

Pricing strategy price adjustment

Discount and subsidy pricing

Discount pricing is divided into cash discount, quantity discount, function discount, also known as trade discount, season discount, price discount.

Tiered pricing

Psychological pricing

Psychological pricing is further divided into prestige pricing, mantissa pricing, and solicitation pricing.

Promotional pricing

Regional pricing

Regional pricing is further divided into FOB origin pricing, unified delivery pricing, regional pricing, base point pricing, and freight-free pricing.

International pricing

7. Differential pricing

The main forms are customer differential pricing, product format differential pricing, and product location differential pricing.