Choose the right pricing strategy to survive and stay top in the business

What is the right pricing strategy? It is a big question before small-business people. Fixation of the pricing strategy is an important decision that will decide the success or failure of the small business. Consumer always try to get the goods for competitive price and whereas the seller always try to maximize the profit by pricing it higher.

The price of the product depends on Company’s popularity, quality of the product and how it is establishing its unique identity in the market. Generally there are four important pricing strategies adapted by the business people. Knowledge and understanding of these pricing strategies will help small-business people to take right decisions.

1.Cost plus pricing;

In this method price is fixed based on the cost of the product and estimated profit. This is a survival strategy because without profit no business survives. Customer is however not interested in costs. Customer assesses the cost of the product by comparing with similar products available in the market. Generally the price of the product must match with the value of the product but not based on cost price. This strategy however is quite useful in the initial years of business where survival of the business is important than gaining profits.

2.Market set pricing;

This strategy is market driven. Market sets the price rather than you fixing the price. When there is higher demand people will pay higher prices and you get benefit out of it. However when the demand is low people tend to pay fewer prices. This is very familiar in travels business. When ever there are holidays the volume of passengers increases and travels people raise the prices. In other days when the demands fall down they also reduce the prices.

3.Value created pricing;

Reputed company’s like Sony, hp, apple, etc. set prices based on this strategy. In this method the value of the product is improved first and then price is fixed. Small-business people must focus on this pricing strategy to get maximum profit and advantage of it. In order to adopt this pricing strategy focus must be on the development of unique brand. Development of brand means development of the trust and relationship. The priority must be given to fast and efficient service to the customer. You need to change goods return and exchange policy and also money back guarantee schemes to develop trust in customers. A lot of patience is required to meet requirements of the customer. You need to ensure that they would not be any communication gap between you and the customer. When you achieve full satisfaction of your customers you can adapt this pricing strategy enhancing the prices gradually.

4.Market capturing pricing;

Many large business companies adopt this pricing strategy, to grab the huge market share. In this pricing strategy the main intention is to capture the sizable market share initially so that they can avoid other competitors. Many big companies like Reliance, Sun direct, etc. are using this strategy to capture the large market share.

You need to assess the situation carefully before fixing the price. There is no hard and fast rule in fixing the price of the product or service. You need to be flexible and change the strategies according to the situation on the ground, taking into consideration the factors which I discussed above. I must tell you business is always dynamic and it is not static and therefore fixation of price also situation dependent. Right pricing strategy helps small-business to survive and stay top in the business.

After understanding right pricing strategy Apply Pareto’s 80-20 rule to improve sales and customer satisfaction

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