Pricing is a very influential variable within sales, it can either boost your output or hinder your success. Through a strategic approach to your pricing, you should calculate the cost of your goods and research your customers price sensitivity, combined with competitors to set your prices accurately.
This can be a hugely effective pricing strategy through its ability to offer your products to a wider volume of customers which previous were out of your pricing bracket. For example, offering products at £10, £100 & £500 versions of products open up three tiers of customers, thus maximising your sales potential and output. The lower priced option acts as a gateway for new customers who may upgrade. Also by offering a range of prices, this can give the customer a choice, but between you and you – not your competition. By offering a range of prices to the customer it gives the customer a greater sense of value as they can pick a product for themselves at a price they prefer.
Discounting traditionally is seen a strong method of increasing sales – which it is, however do so with caution. By lowering your prices this could result in a devaluation of your brand, and could affect your customers shopping experience. If done correctly, discounting can be used by your store staff by communicating with your customers which is far more personal. This compared to placing large discount signs around your store may have a more negative effect which could hinder the sales of your full price items.
‘Useless’ Price Points
The Economist magazine once had 3 subscription options that readers could choose from.
1. Web only subscription – £59
2. Print only subscription – £125
3. Web & Print subscription – £125
Which appears to be of greatest value? Option 3 is made to seem far more valuable from the apparent ‘useless’ price point of option 2. Consumers are inclined to choose option 3 as its seen as the best value for money, however if option 2 is removed, more readers would be inclined to choose the cheaper alternative.
Pricing can have a great influence of the perceived value of your product, which needs to be considered when pricing your range.
One of the most prevalent but successful behavioural pricing strategies, the 99p price tag could have a significant increase in your sales, and encourage shoppers to purchase. 99p has been proven to have a psychological association with discounts, therefore from a relatively small price drop, the item may have significantly more value to the customer.
Research showed that lowering the price of a pizza from £7 to £6.99 had a 15% increase in sales.