Price Strategy
How do you know how to price your product or service? Your product's price often communicates as much to the consumer as its advertising. People perceive a product's value based on its price in many situations -- it depends on what your product is and who your market is.
Here is an example: An established restaurant that had just started getting fresh seafood daily from the coast (which was about a four-hour drive away) and was charging eight dollars for a typical seafood dinner entree. They couldn't sell it at all. Rather than lower the price or drop it from their menu, they decided to raise the price to $12.95. The fish sold like crazy. The moral of the story is that people are leery of cheap seafood.
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The moral for you is: Be wary of super low pricing. Your customers are looking for value, not the cheapest product they can find. Price your product strategically by looking at:
- The competition (or lack of it) your product faces - If your product is one of a kind, particularly if it's in the technology field, then higher initial prices may be more palatable to consumers (and even expected).
- The sensitivity (or insensitivity) of your customers to pricing for your type of product (as in the case of airlines)
- The price elasticity (the lower the price the more you sell and vice versa) - Keep in mind what you have to sell in order to make a profit, and then chart out the variations in prices and quantities to sell in order to pinpoint the right one.
- The value of the product as it relates to the value of the price - People may pay more for a similar product if they think they will get more out of it.
- The positioning you've established for your product
编写定价箍tegy section of your marketing plan and back up your pricing decisions with current data about competitors' prices, price surveys, etc.