Six Best Pricing Strategies to Increase Sales

Thu, May 6, 2010, by James Henry Abrina

Money Making

Get customers with your quality product. Get more customers by giving the right price. Here are six tricks to increase sales using the right pricing strategy.

Price is the deal breaker ever since money replaced barter in the market. Right pricing means almost a done deal while overpricing may mean one customer less or a law suit. However, there are different pricing strategies to get a lot of customers without losing a cent from your POS. Whatever you choose, make sure your price is worth the customer’s purchase. Here are the common strategies that you should apply to gain more income.

1. Penetration Pricing.

This is giving only one set of price to fit all parts of the market, from the higher to the lower class. Its main objective is to increase sales volume and market share rather than to gain profit right away. By using this, you will establish reputation first then when quality is already proved, price increase in the future will no longer be questionable.

  • Example: A shampoo product will be sold in the lowest price in the market. Many people will try it in hopes of finding a more affordable alternative.

  • Best for: Services like start-up advertising agencies that will show immediate results and difference from competitors.

2. Cream-Skimming.

This is jacking-up prices to earn right away. Remember, a shift from high to lower prices always elicits positive response while a shift from low to higher price is always negative. Unless the market pricing trend clearly indicates, then the latter can be false.

  • Example: A brand of bag will be sold in a price higher than the competitors. This is a sure way of return-on-investment (ROI).

  • Best for: High-end products or services like clothes, especially those which are already under reputable names/brands or company.

  • Pitfall: This is never for the general market especially the lower class. If not supported by good promotions and product development, the business may end up as a short-term venture.

3. Price Management or SRP (Suggested Retail Price)

This pricing strategy is one of the most beneficial to customers’ interest as this enables you to control the market trend while monitoring any offenders. Many products are already mandated by law to have a price limit. However, setting a ceiling price for a new product or service may need consultation from a certain body of government for more effective enforcement.

  • Example: Every soap bar will be sold at the same price by all retailers. Your customers will know they are giving money at the right price everytime they buy.

  • Best for: Small merchandise like toiletries.

  • Pitfall: Retailers and wholesalers alike may feel reined in a tighter way by being given little freedom in making pricing decisions.

4. Price Lining.

This pricing strategy is like putting a front act to gain attention for a new or re-branded product. It aims to make customers feel they are getting more from you. This is very good as you can promote two or more products at the same time, for free. Some common ways of price lining are: buy one take one, free sample of another product, and the most lucrative: discounts.

  • Example: A free toothbrush for every box of toothpaste. You’re not only gaining higher sales, you are promoting (or rather, giving a free trial) your toothbrush as well.

  • Best for: Small merchandise like toiletries, personal stuff like clothes and personal services like salon.

  • Pitfall: It has a lot of Pros and Cons. This is applicable only in a certain duration. If used excessively, bankruptcy may be the result. Likewise, if your product gains sales for that certain period but drops rapidly after the additional offer is gone, you might find it hard to get back on track and recover what is already lost.

5. Odd Pricing.

This pricing strategy uses psychology to lure buyers. This is most commonly adapted as a discount. Although this is a weak application of psychology, somehow, it works effectively. Probably customers don’t mind the pricing at all, but the fact that there is a discount.

  • Example: A product is sold at $99.99. Technically, there is almost no difference from that to something sold at $100. But the two figure price at initial glance is a more attractive offer than a three-figure price.

  • Best for: Luxury products like clothes, furnitures or anything that is sold in higher prices. Better done with a store- or mall-wide sale.

  • Pitfall: The psychology is not very effective if your business offers very few products.

6. Flexible Pricing.

Or more commonly know as haggling.

  • Example: Flee markets, garage sales, bazaars.

  • Best for: Outdoor sales like those mentioned. However, anticipate intense haggling from customers. Be sure to make your initial price higher than the normal range in the market so cutting off prices may not be a problem.

  • Pitfall: Haggling is often associated with second-hand things, cheap and may not be allowed inside establishments.

    __________

    James Henry Abrina is an editor, writer, SEO specialist and currently a Corporate Communication Professional, Market Desk Strategist, Business Development Officer and Unit Head for Business Profiles Incorporated.

    He currently specializes in security management and business intelligence. Together with the company, he advocates Business Continuity Planning to change how the Philippine business sector sees the definition of crisis response and management.

    For more useful information, read his articles at Invisible Squares and Masscom Tutor. Or his EzineArticles page.


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