Today we will dive into the world of pricing strategies, how and what are the different pricing strategies used by major companies as well as small and medium business owners

What is Pricing ? It is the money you charge to your customers for your product or service. However, arriving at a right price point requires lots of understanding about competitors, potential customers, brand value, product know-how etc.

What is a Pricing Strategy ? It is a set of processes and methods that businesses use to determine price for their product or service. So pricing is what you charge to the customers. And strategy is to decide how much to charge, the price has to be correct otherwise it can make or break a business, no one can sustain in the long run by over charging the customers or undercut the price of the product.

There are many ways to determine the price. The most common are

CostAdd pricing Add your costs and arrive at a price Manufacturers, distributors, retailers, restaurants, small and medium businesses everyone finds this pricing to be simple and straightforward.

Example – A hardware store sells basic stuff like pipes, electric cables, nails, hammer on all these goods it’s difficult for him to arrive at Value based price or charge premium, so all he does is add his costs and a profit margin and sell the goods.

Most businesses follow this model and calculate their selling price.

Competitive pricing You price as per what competition is doing. Many major FMCG companies follow this approach. Let’s say a company is selling hair dandruff shampoo at price X, the competition will follow this price and match the pricing of their shampoo to stay competitive. It applies to many products, like potato chips, biscuits, bakery products, cleaning and hygiene products and more where companies price their products based on competition.

This practice oftens leads to aggressive price wars So if a company X lowers the price of their product their competition will also do the same.

And at times it leads to Dismissive pricing as well. Example-A company is confident of its brand value and customer loyalty that if competition decides to lower the price of their products, it does not affect them and they play at the same price point.

Deepak R