Prices are one business element that can have business potential energy. Choosing right pricing strategy can have important impact on the quantity of the business potential energy. If you choose price strategy with lower prices your potential energy will be smaller because prices have direct impact on your cash flow and cash is another business element that has business potential energy. More cash means greater business potential energy.
You must think about your price strategy and how they will impact on your business potential energy. You can choose one strategy for the startup and another later. For example, you can choose introductory prices in the startup level but after that to change strategy that will bring increasing of the prices. The most important thing is to choose the best combination of the pricing strategies. Because in some cases low introductory prices will give you good customer base, but when you increase your prices probably you will lose some part of that customers base.
My opinion is before you choose one of this strategy first determine your pricing objective and think about your average markup and industry average. When you determine your pricing objective you must think about a profit level that you want to obtain, specific market share with certain sales volume that you forecast about your business.
Here is 8 different pricing strategy that you can choose for your business.
- Introductory prices. This strategy means to set low prices that are used to gain entry into the market. This strategy is usual used from startup companies and companies that want to enter in the new market.
- Skimming. With this strategy, you are setting high initial price and then gradually lowering the price. Usually this strategy is used from businesses that introduce unique products at the market and after some period of time when competitiveness is increasing, they are lowering prices.
- Price lining. With this strategy, you must group the products into the different categories and then setting the same price for all items in each category.
- Odd-ending. Prices set at odd numbers such as $2.99, $3.99 and so on. This strategy is also called psychological pricing because can impact psychologically on the decision of buying.
- Loss leader. This strategy means selling some items below costs to attract more customers and market share. Once this is achieved, the price is increased as normal. This strategy is used to increase selling of some items, to attract more customers and to increase market share. Be careful with this strategy. When once you low the prices it is much difficult to increase them.
- One price for every item. This strategy means setting every item equal to the same price. For example, all for $5.00. You must find average costs and average markup and set all items at that one price.
- Bundling.With this strategy you are grouping items together and selling them for less than if each item were purchased separately. With this strategy, you want to increase average selling volume from one customer. This strategy can be used periodically to increase sales volume.
- Premium prices. This strategy means setting high prices because of uniqueness of products or services. If your product or service is unique you can set really high prices for them.
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