Main pricing methods and strategies: how to set the price of a product?
The price set by the company must “position itself” between a very high value to generate consumer demand and a very low value to generate profit, always remembering the general costs, including those related to marketing channels.
Consumers' perception of the product's value determines the maximum price the company can achieve: if the price exceeds this limit, consumers will not buy. Product costs, on the other hand, define the minimum price the company must choose to cover costs and not incur losses.
Furthermore, when determining the price, the company must take into account internal and external factors, such as competitors' strategies and prices, as well as its distribution channel strategy.
In practice, of the price of a product. Let's see what they are:
1. Cost and profit-oriented methods
With regard to cost-oriented methods, it is possible to cite as an example one of the most common and elementary pricing strategies, namely, the markup, whereby the selling price of a product is determined by adding a standard markup to the cost that the product has for the company, thus corresponding to the relative profit margin.
On the other hand, another method, always cost-oriented, is based on the return on investment: in this case, the company establishes a rate of return on investment to be achieved and the price is defined taking into account the achievement of this objective.
2. Demand-driven (consumer) methods
As for demand pricing methods, they are based on the analysis of consumers' perception and evaluation of the product and how much they would be willing to pay for it.
Think, for example, about the world of tourism and how companies increase travel prices during peak season (since consumers are willing to spend more at these times of the year) compared to what happens during low season.
Marketing research is particularly useful in industry email list obtaining this data and therefore identifying the most appropriate method to maximize profit.
It should be noted that if the company does not have a realistic idea of the perceived value of the product by consumers, it could set a price that is too high or too low in relation to what the former would be willing to pay.
3. Competitor-oriented methods
Some methods are more oriented towards competitor analysis, because prices are often a “reaction” to those of competitors.
In these cases, competitive prices serve as a reference for determining the prices of their products. Especially for product categories where there is high price sensitivity, companies sometimes aim for a slightly lower price or offer special offers, which can affect consumer choice.
This was our guide to everything about marketing channels. If you still have any questions about the subject, comment below and we will answer them. See you next time!
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