How to Determine a Pricing Strategy

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How to Determine a Pricing Strategy

How to Determine a Pricing Strategy

Raising or lowering prices can bring direct consequences, both positive and negative for your business so it is a really difficult decision to make, if prices go up, sales could fall, which will have fewer benefits than before, if for the contrary to deciding to reduce prices, sales could increase and thus compensate for a lower profit margin.

The million pound question is: What to do?

A large number of entrepreneurs, SMEs and companies both on the internet and outside it, are directed to the same niche market and sell similar products or services, and what is worse, with little or no strategy that differentiates them from their competition, so they are perceived almost identically by their prospects, when deciding one or the other most likely in this case, is that who wins the game is the one that has a lower cost, but not always this decision is something so simple, and your customers will not have it so clear.

How to identify the appropriate pricing strategy.
The right price strategy for a product or service might not be a unique strategy. The smart way to determine the pricing strategy to follow could be to combine two or more strategies into one. For example, for the launch of a new product or products in their initial stages of life cycle, the most appropriate strategy could be a combination of launch prices within the target market that is aimed at increasing the share of market penetration goal and psychological prices to produce or trigger an emotional buying decision, rather than a decision to buy by logical reasoning. Once you reach the penetration targets within your niche, you may decide to change the pricing strategy to include only the psychological prices.

Before offering you the keys to identifying the pricing strategy you need we will clarify some very important points that are related to this problem that we have to solve.

It is not the same price as value.
Two companies that target the same niche market and with similar products or services change prices in the same articles for the same amount, but the two companies can achieve very different results:

– Why do they have different results?

Very simple, for the perception of the value inherent to the product or service. It is not the same price as value, most people do not move only motivated by the price of an item but by the value it represents for it, the perception of value that a product or service has begins in the minds of people, for this reason is that the best-selling products or services are not exactly the cheapest.

That is, you can change the price and leave the value equal (the perception of quality will not vary much) or you can improve the perceived value which would allow you to modify the price of your product or service.

Unique Selling Proposition.
As you can see in the previous point, it is not the same price as value. The perception of value that your prospects play has a very important role in the decision you make as to whether prices go up or down, which is why it is very important that you keep in mind that in order to define the prices of what you sell, your company must have a vigorous and well-developed business positioning strategy that makes your products or services different from your competition, which is the same, you should know How to Develop a Unique Selling Proposition, as this will help to enhance and improve the of perception of value of the products or services that sells in your business.

Make an analysis before making a decision.
Before you make a decision that affects the prices of your products or services, you should do an analysis of what sells your business versus its competitors, the result could help you establish and improve the perception of the value inherent in the product or service that Sells and how it could affect its customers a strategy of raising or lowering prices, in this way could almost accurately predict the reactions that may have competitors.

Brainstorming with the staff involved in the sales area of your company could help you to improve your differentiation strategy to some extent, then I am going to provide you with some questions that you can include to do the analysis that will help you Determine where the wind blows:

– Is your product or service expensive or cheap?
– Is it expensive or cheap compared to what products or services?
– How much do you think your client is able to pay?
– Could your customer get a product or service very similar to yours at a lower cost?

Arriving at these reflexions regarding the price and value of a product or service can be concluded that this is at least a two-dimensional problem, but do not rush, because there are still more agents involved.

Low or high price strategies.
If you have more than one product or service, consider raising prices only in some of them and leaving others as they are, or you could go even further and consider pricing a small group well temporarily for through a punctual promotion or with a permanent reduction.

Some customers are sensitive to the smallest price hikes of a particular product or service while most ignore other increases that may occur.

If you sell tangible products you could consider lowering prices as low as possible, as long as you can offset these prices with greater profits from sales of accessories for those products, on which customers are less sensitive to high prices, but be careful that if this is not your case then I do not recommend that you do so.

In any case if you want to face your competition with a strategy of low prices, this will ultimately have to decide you, because it is ultimately who knows your product or service, the target audience that is addressed and the reality of your company , or at least in theory you should know, I can only tell you that it is a very delicate subject with which you have to be very careful, because it could bog down your business and even bring it to closure.

In any case wanting to achieve notoriety, trying to be “The king of low prices” without having differentiated their products or services will most likely lead to failure, because if it does not have an added value that increases the perception of value in the mind of your customers, it is very difficult for your prospects to trust the quality of the products or services your company sells.

Seasonal pricing strategies.
You must choose the most opportune time to make the price changes, this should be when you have the least resistance on the part of your prospects. if the increase in sales of your business is determined by the seasons or seasons, there is no doubt that the choice of when to raise or lower prices will also affect the income of your company in those periods. A good strategy if your product or service has more or less consumption according to the season of the year is to have offers or promotions with reduced prices before a certain season, in this case could design for your business a strategy of seasonal prices.

For example: You could have a promotion in the fall, when Christmas is very close (Pre-Christmas Offer), so some of your buyers could rush to buy them to save some extra money with them, thus increasing volume of sales offsets the lower profit income per unit.

Once the high seasonal season arrives, prices may rise, increasing demand may compensate for lower post-christmas revenues, however the best time to raise prices is when your product or service has more consumption or demand. However seasonal offers or promotions may be the most opportune time to make the price changes, because at that time offer the least resistance of your prospects.

Whether you plan to lower or raise the prices of the products or services you sell in your business, to determine the strategy to follow for your company, you have to do an internal analysis that allows you to determine what strategy or combination of pricing strategies is going to use. Either way this pricing strategy should always benefit your prospects and your business, if so, then your company will have “established a good communication by saying what is due, to the right person, at the most appropriate time” and may increase the opportunities to make more sales. Omar Jareno.


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About Omar Jareno

Director/Founder At SEO & Design Ltd

Omar Jareno in San Paul Church

Omar Jareno is a SEO specialist in London with more than thirteen (13) years of experience in online store design and development with the support of a multidisciplinary team of Professionals from the UK. If you need help with SEO, web design, social media marketing, email marketing strategies, or content development to successfully take your business to the internet, contact him through this website.


Omar Jareno is a SEO specialist in London with more than thirteen (13) years of experience in online store design and development with the support of a multidisciplinary team of Professionals from the UK. If you need help with SEO, web design, social media marketing, email marketing strategies, or content development to successfully take your business to the internet, contact him through this website.

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