How do you price your products in light of economic fluctuations?
Are you thinking of putting your own product on the market? Do you own a company and want to launch a new product? Or are you having trouble with your production revenue? In the event that you are one of these, then you need to know how to price your products in light of economic fluctuations in order to be able to reap good financial returns.
product pricing
The product pricing process plays an important role in determining the financial return of the company or business owner, no matter how big or small this business is, especially in light of the fluctuations the whole world is currently facing at the economic level. For corporate owners.
But before talking about the most appropriate ways to price products, we must first understand the meaning of product pricing and what is meant by the concept of pricing strategy.
When any company introduces products to the market, it sets a price to sell them at, and this matter is known as the pricing process. As for the pricing strategy, in short, it can be defined as the methods and means that small and large companies rely on in determining the prices of their goods and products.
Factors to consider when pricing products
No company, large or small, can set the prices of its products at random. No product or commodity is priced based on the cost paid for its production only, but it requires more thinking and calculations.
“The amount a customer is willing to pay for a product has little to do with cost and more to do with how much they value the product or service they are buying,” says Eric Dolansky, Associate Professor of Marketing at Brock. (University of St. Catharines, Ontario).
Dolansky developed a pricing technique that he believes all entrepreneurs must follow and adhere to, stating that pricing the value of the product depends on the customer’s own estimation of it and its cost at the same time as calculating the profit return.
Hence, it can be said that there are a number of factors that are taken into account during the pricing process, namely:
- production cost.
- distribution cost.
- The physical level of the target segment.
- economic market condition.
- Trade Payments Margins.
- competitors’ prices.
- The importance of pricing products according to economic conditions
Any organization or company seeks to increase its profits in any way, and now society as a whole suffers from volatile economic conditions, which is clearly reflected on the sales market and thus on profits, and here the importance of pricing the product in line with economic conditions appears.
You cannot set high prices for products in a recession, just as you cannot offer products at a cheap price if the selling market is booming.
The importance of setting an appropriate pricing for the product or commodity lies in the fact that it is one of the most important means of marketing and promoting products.
You have to realize that the more you set a good price, the more profit you can make once your products are on the market.
In order to be able to take advantage of good pricing advantages, you must adopt one or more of the following pricing strategies and apply them correctly.
The most important product pricing strategies
If you are a small business owner and really want to know the best ways to price products in light of economic fluctuations; There are a set of strategies that are considered optimal for setting pricing, which are:
Market Penetration Pricing Strategy:
Setting appropriate pricing for the goods or product can be your way to prove yourself in the market if you are a beginner, and this is through your reliance on the penetration strategy, which aims primarily to attract customers by offering a few goods in the price compared to competing goods.
Although adopting a penetration strategy increases the spread of your goods in the market and reaches the target audience faster and is sure that it is full of risk; Indeed, it is possible to avoid losing at the beginning, but the profits you achieve after a while due to the spread of your commodity and the public’s awareness of it can easily help you avoid that loss and ensure your position among competitors.
Economy pricing strategy:
This strategy is based on reducing expenses in production and even marketing in the largest possible way, and it is a method followed by many companies, whether distributors, major dealers, or even retailers.
The low cost of production here enables the company to offer products at a lower price without facing any loss and making profits, albeit somewhat small.
It should be borne in mind that this strategy is suitable for large companies and not for small or start-up companies that basically have few sales so they cannot risk getting small profits.
Competitive pricing strategy:
This strategy is also known as the competitive pricing strategy, and it depends mainly on the prices of the same commodity in the market regardless of the cost expenditures or even the size of customer demand for it.
The main criterion here for setting a price for a product is competitors’ prices; When the same commodity is available in the market with close quality, customers tend to prefer commodities that are lower in price, which is what many companies use to reach and attract the target audience.
Dynamic pricing strategy:
It is also defined as an ordering strategy, or a time based price positioning strategy.
This strategy is distinguished from others by flexibility, as the prices here change according to customer demand for the same commodity, and we can clearly notice it in hotels, airlines, halls, and venues for events and celebrations, as they all set the price according to the season and the increase in demand.
Promotional pricing strategy:
This strategy relies on offering discounts or gifts on the product in order to attract customers to it. For example, we see some stores giving customers vouchers when they reach a certain amount of payments.
Some people adopt this strategy, especially during the period of discounts, so we find offers, for example, to buy one and the other as a gift, or to buy the product at half the price in certain periods. This strategy is often followed in times of recession or in seasonal times when other places also offer similar offers.
Psychological pricing strategy:
Instead of addressing the mind of the target customers, this strategy addresses their psychological state and emotions. It is known that the price or material cost is the first thing that attracts the attention of customers. If we offer a piece of clothing at a price of 500 pounds with high quality, and we offer the same shape in a lower quality at a price of 300 pounds, we will find customers flocking to the piece that is the lowest in price while neglecting the difference in quality.
The customer’s affection here led him to look at the lower price and made him think that his profit is in reducing the price and he did not realize the importance of quality.
Post selection of pricing strategy
Once you determine the pricing strategy that is appropriate for you, your financial situation, and the nature of your product, you can increase your profit margin little by little, but you will need some auxiliary means such as reliable accounting software and a data monitoring base so that you can evaluate the pricing strategy that you have adopted and help you change prices. at the right time and thus increase your profit and stay in the market.