How are the prices of products determined? Many entrepreneurs add a certain margin to the cost of manufacturing or purchasing finished products and thus determine the final price of the goods. Is this method effective? Not completely. A well-thought-out pricing strategy will bring the best results! We present the most popular pricing strategies.
What is a pricing strategy?
The pricing strategy is to set the value of the offered products or services in such a way as to achieve maximum profits and generate a high share in the target market. When determining, it is necessary to take into account, first of all, factors such as: production / purchase costs of the product, the current industry situation, price trends, economic conditions, demand and competition analysis.
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Popular strategies
The pricing strategy is an important element development strategy enterprises. Skilfully implemented, it can increase the sale of the product and thus positively affect the profits. What pricing strategies are the most popular?
- Cream harvesting strategy
A pricing strategy of overpricing. The method is mainly used when introducing innovative, unique products to the market that no one else offers. The inflated price gives the offered item the image of an exclusive product of better quality. The strategy will only work for a short time - until the competition appears on the market.
- Market penetration strategy
The entrepreneur offers very low product prices to maximize sales and gain a large market share. This strategy will work in the case of placing products on the market. It can also be used to retain the company's existing customers. A necessary condition for the success of the strategy is a high price elasticity ratio of demand.
- The strategy of imitation
A pricing strategy based on setting prices similar to those offered by market competitors. It is worth bearing in mind that the method will only work when the offered product stands out from the products of competitors who have stable positions on the market.
