Winning pricing strategies.

Why do you need to have a pricing strategy?

Pricing at the end of the day is what determines the fate of your product. Especially on platforms like Amazon with its myriad competitors, strategic pricing will be one of the crucial factors in deciding if your product ultimately wins the buy button.

The Buy button is what decides if you make a sale when a customer adds a product to the cart on Amazon.

Now there are numerous pricing strategies that could be incorporated depending on your brand’s requirements and position. Here are some of them listed below.

Types of pricing strategies

Types of pricing strategies

Penetration pricing

  • This is when new brands set a low price to attract demand in the market.

  • Once they have a good footing in the market, they gradually increase their prices.

  • The strategy here is to pull in customers with low prices and earn their loyalty enough to be able to raise prices

  • Eg: New streaming services offer subscriptions at a lower rate and then gradually increase their price as their customer and subsequently content library expand.

Price skimming

  • Quite the opposite, this is where brands peak the price initially.

  • This is done to capture those customers who are willing to pay a premium price for the novelty of the product.

  • Once a customer base is established, with the rise in competition, they then gradually decrease the price.

  • Eg: A new 8k TV is priced at 80000 rs for tech enthusiasts and gradually lowers the price as it becomes more mainstream.

High-low pricing

  • The regular price here is set high on which occasional discounts are offered.

  • The difference between the regular price and discount price is high-low.

  • This strategy is where the regular price is set high to create a perception of value during the discounted period.

  • Eg: Jeans costing 400rs are sold regularly at 800rs but sold at 500rs during discounts.

Promotional pricing

  • Promotional pricing offers discounts and offers to stimulate sales

  • Generally used during sales events or to clear out excess inventory.

  • The key feature of promotional pricing is the short-term nature of discounts tied to promotional events and sales seasons.

  • Eg: Grocery stores offer a ‘Buy 2 get 1 free’ offer during back-to-school season.

Premium pricing

  • Brands set extremely high prices for their products.

  • This is done to give them a sense of quality and luxury in the eyes of the customers.

  • This leads them to accept the high price and even reject products priced lower as low quality.

  • This is a tricky strategy and to read more on how strategically premium brands price their products check our blog.

Psychological pricing

  • Pricing is not only based on costs and margins.

  • It is heavily influenced by consumer behavior and perception

  • Psychological pricing is where businesses use psychology to influence customer perception.

  • Eg: Setting prices below round numbers ( 99 rs instead of 100 rs) gives consumers a false perception of low prices.

  • To delve deeper into the psychology behind pricing, check out – our blog  Psychology of Pricing.

Bundle pricing

  • Multiple products are offered as a package or ‘bundle’ at a lower price than purchasing them individually.

  • This encourages customers to buy more products and helps in increasing both sales and customer satisfaction.

  • Eg: Fast food restaurants offer combo meals containing (burgers, fries, and coke) for slightly cheaper than if you purchase the three individually.

  • Businesses use another clever strategy to influence consumers’ decisions. It is called the decoy effect. To know what it is read how the decoy effect influences customers’ choices through pricing.

Competitive Pricing

  • The product’s competition and subsequent pricing are analyzed before setting your own product’s price.

  • Competitive pricing is vital in positioning your brand strongly against substituted offerings.

  • It plays a crucial factor in ensuring your brand’s successful stance in the market. A more detailed account of competitive pricing and its importance has been addressed in this article – ‘How to gain an edge in competitive pricing?’.

Dynamic pricing

  • Dynamic pricing is a much-needed strategy in today’s fast-paced economy.

  • This is where pricing is adjusted according to real-time fluctuations in market factors like demand.

  • Just like competitive pricing, the roots of dynamic pricing run far deeper. To study more go through our blog on dynamic pricing – the ultimate guide.

  • Eg: New streaming services offer subscriptions at a lower rate and then gradually increase their price as their customer and subsequently content library expand.

Price skimming

  • Quite the opposite, this is where brands peak the price initially.

  • This is done to capture those customers who are willing to pay a premium price for the novelty of the product.

  • Once a customer base is established, with the rise in competition, they then gradually decrease the price.

  • Eg: A new 8k TV is priced at 80000 rs for tech enthusiasts and gradually lowers the price as it becomes more mainstream.

High-low pricing

  • The regular price here is set high on which occasional discounts are offered.

  • The difference between the regular price and discount price is high-low.

  • This strategy is where the regular price is set high to create a perception of value during the discounted period.

  • Eg: Jeans costing 400rs are sold regularly at 800rs but sold at 500rs during discounts.

Promotional pricing

  • Promotional pricing offers discounts and offers to stimulate sales

  • Generally used during sales events or to clear out excess inventory.

  • The key feature of promotional pricing is the short-term nature of discounts tied to promotional events and sales seasons.

  • Eg: Grocery stores offer a ‘Buy 2 get 1 free’ offer during back-to-school season.

Premium pricing

  • Brands set extremely high prices for their products.

  • This is done to give them a sense of quality and luxury in the eyes of the customers.

  • This leads them to accept the high price and even reject products priced lower as low quality.

  • This is a tricky strategy and to read more on how strategically premium brands price their products check our blog.

Psychological pricing

  • Pricing is not only based on costs and margins.

  • It is heavily influenced by consumer behavior and perception

  • Psychological pricing is where businesses use psychology to influence customer perception.

  • Eg: Setting prices below round numbers ( 99 rs instead of 100 rs) gives consumers a false perception of low prices.

  • To delve deeper into the psychology behind pricing, check out – our blog  Psychology of Pricing.

Bundle pricing

  • Multiple products are offered as a package or ‘bundle’ at a lower price than purchasing them individually.

  • This encourages customers to buy more products and helps in increasing both sales and customer satisfaction.

  • Eg: Fast food restaurants offer combo meals containing (burgers, fries, and coke) for slightly cheaper than if you purchase the three individually.

  • Businesses use another clever strategy to influence consumers’ decisions. It is called the decoy effect. To know what it is read how the decoy effect influences customers’ choices through pricing.

Competitive Pricing

  • The product’s competition and subsequent pricing are analyzed before setting your own product’s price.

  • Competitive pricing is vital in positioning your brand strongly against substituted offerings.

  • It plays a crucial factor in ensuring your brand’s successful stance in the market. A more detailed account of competitive pricing and its importance has been addressed in this article – ‘How to gain an edge in competitive pricing?’.

How AI helps you

Manually implementing a pricing strategy is more complex than it seems. Brands could face a lot of adverse effects due to incorrect pricing. Read how on our blog brand dilution due to incorrect pricing

It is evident that gauging your product’s position and value in comparison to your competitors, analyzing customer sentiments, and staying on top of trends require a lot of time and effort. Conversely, AI pricing engines can help automate and streamline the implementation of these strategies to ensure your product sets the optimum price.

To learn more about how AI pricing solutions can help you read our article.

Book a free demo of our automated retail solutions or contact our optimization experts at info@sciative.com.

To know more about our AI-powered dynamic pricing tool BRIO, reach out to us.

 

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