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7 Factors That Will Influence Your Product Pricing Strategy - PR
7 Factors That Will Influence Your Product Pricing Strategy - PR
7 Factors That Will Influence Your Product Pricing Strategy - PR
Regardless of whether you intend to offer your products at a low-price or high price, you must first
understand your market and strategize according to its demand and income level. Learning how to create a
competitive product pricing strategy in business (https://www.profitableventure.com/business-plan-
marketing-strategy/) is crucial, especially if the goal of your marketing plan is to increase market share and
survive in a very competitive environment.
When trying to adopt a product pricing strategy or determine the right price for your product, the issue of
competition is a factor that must be trashed out effectively. The more intense the competition in your
industry is, the more flexible your product pricing strategy and policy will have to be.
The point I am trying to stress here is this; if your competitor sells the same product you are selling but at a
lower price, it may affect your business negatively. That is why a feasibility study or business plan always
includes an opposition or competition analysis (https://www.profitableventure.com/business-plan-
competitive-analysis/) section.
Never implement your product pricing strategy without first putting your competition into consideration.
Pricing your product without giving a heck to your competitor’s product pricing strategy is a sure way to
business failure; so don’t do it (https://www.profitableventure.com/causes-of-business-failure/).
“The ultimate goal of the Dangote Group is to dominate every niche in which it operates. In
order to achieve this goal; we acquired over 3000 new trucks, developed a strong
distribution network and increased production capacity
(https://www.profitableventure.com/motivate-employees-increase-productivity/). Our
strategy is to sell our products faster than our competitors and at uniform price.” – Aliko
Dangote; (https://www.profitableventure.com/aliko-dangote-richest-black-person/) the
richest black man in the world
But in this case, I am not talking about production cost. I am talking about product development cost; a cost
incurred from research and experimentation, a cost that’s usually incurred when bringing an innovative
product to the market. If you are a business owner, you should know that newly introduced products
usually command a high price. This high introductory price is based on two reasons:
The first reason for the high product price is due to lack of competition. Since the product is the first of its
kind in the market place, there will be less or no competition thereby giving room for the company to fix
price.
The second reason is this; a high price will enable the manufacturer recover the heavy investments
channeled into the research and development of the product.
However, I have seen some company successfully use the product pricing strategy of losing on the front end
by pricing below cost price only to recoup you losses and pick up some profits from the back end. So
whatever product pricing strategy (https://www.profitableventure.com/price-saas-products-business-
model/) you choose; just make sure it positively adds to your bottom line.
4. Economic trend
This is another unavoidable factor that can influence the pricing of your product. I don’t even need to stress
much on this. As an entrepreneur, you should know that economic factors such as taxation rate, labor cost,
inflation rate, currency exchange rate (https://www.profitableventure.com/entrepreneurs-know-foreign-
exchange-rate/), government’s fiscal and monetary policy will definitely influence your adopted product
pricing strategy either positively or negatively.
6. Demographics
The demographics of the targeted customers will indisputably influence the pricing of your product
(https://www.profitableventure.com/sell-your-products-fast/). Demographic factors to consider before
taking a stand on your product price include:
To cut it short, demographics is all about who your targeted customer is. Let me share an illustration with
you. Assuming your product is a portable bag (https://www.profitableventure.com/starting-paper-bag-
production/) specifically designed for students.
If the region you are targeting has a population of maybe 100,000 out of which 90% are students. The result
is that your product price will be affected positively. But if the case is reversed and you have a population
where only 10% are students; you know what to expect.
Example of an entrepreneur that adhered to the “class of targeted customer” factor while devising a product
pricing strategy and became extremely successful was Henry Ford, founder of Ford Motor Company. His
company’s mission statement was “Democratize the automobile.”
Before the coming of Henry Ford, cars were exclusively for the rich. Another entrepreneur that won at the
product price level was Sam Walton, founder of Wal-Mart. His adopted product pricing strategy was
summed up in the company’s slogan “Always low price.”
This is because the price of your product can either break or make your business so it should not be
handled with kid gloves. Wal-Mart have gained and retained leadership position in its industry simply
because of their unique pricing strategy. They devised a unique pricing strategy that set them apart and
gave them competitive edge (https://www.profitableventure.com/richard-branson-quotes/).
“Anybody can cut prices, but it takes brain to produce a better article.” – Phillip D. Armour
Your adopted product pricing strategy can give your business an unfair advantage just like Wal-Mart’s and
that’s why most businesses try to compete at the price level. Now how do you adopt a pricing strategy that
sets you apart? What factors need to be in place before implementing or adopting a product pricing
strategy? You will find your answers below.
“There is one rule for the industrialist and that is: make the best quality goods possible at the
lowest price possible, paying the highest wage possible.” – Henry Ford
Without wasting your time, below are the 7 critical factors that can influence the pricing of your product.
“The best thing to invest in your business is your time. To schedule, plan and use time
effectively, know your turf and know your objectives. Assess the obstacles and opportunities,
then devise your strategies.” – The Mafia Manager
To maximize profit
To achieve or maintain market share
To achieve target return on investment
To meet or prevent competition
To maintain stable prices
After understanding your own products, and your competitor’s strategy; it’s now time to create your own
pricing plan, strategy and tactics.
I will shed more light on the pricing tactics above in subsequent articles. Now while testing your pricing
methods, you should also increase your advertising activities whenever possible and introduce new
products and services that complement your current offerings to the market. The intended effects will not
be complete without providing incentives or rebates just to capture the market’s attention.
How to Create a Competitive Product Pricing
Strategy in Business
Pricing strategies are in fact considered to be the main competitive strategy every business must exploit.
This is so as most businesses, whether small, medium, or large in scale rely on reducing their prices just to
stay competitive in their business niche. It is also the costliest among the strategies that businesses used
(https://www.profitableventure.com/successful-strategy-models/), and it is very hard to reverse when
needed.
In some cases, using the pricing strategy to stay competitive can be very disruptive throughout markets;
because once you have lowered the price of your products and services to have things going your way,
restoring it can be next to impossible. So how do you go about creating a strong pricing strategy?
This will require you to consider carefully what your market can afford to pay for your product or services
(https://www.profitableventure.com/afford-professional-marketing-services/), thereby enabling you to zero
in on your target market share objectives; while obtaining revenue at the same time. The best part of it all is
having the ability to maximize your profits (https://www.profitableventure.com/invest-in-your-business/)
without necessarily affecting the environment around you.
It’s always a good idea to know your competition so you can challenge them at their weakest, thus putting
yourself in good ground. This is where the need for a SWOT (Strengths, Weaknesses, Oppositions and
Threats) analysis comes in. Now that you have already identified their weaknesses, you have something
concrete to work on.
This would mean going after their unhappy customers (those who are not satisfied with the products and
services that the competition had offered) and moving in to exploit competitors with their low brand
awareness (https://www.profitableventure.com/marketing-campaign-brand-awareness/). You can also
maneuver to focus on certain geographic locations where the competition is relatively weak, and where the
opportunities to grab market share fast enough is possible.
As a final note, I think it’s worthwhile you know that price is a double edge sword that can either make or
break your business. So when devising a product pricing strategy; do it with utmost caution.
To be on the safe side, don’t do it alone. It would be wise to avoid meeting head-on with your competition
while implementing your tactics; so try and work your way around into areas that are less competitive.
Devise a product pricing strategy together with your business team, professionals or external advisors.
Agility and fast thinking really helps in this case. Start somewhere else comfortable so you can initiate
changing the rules of the game to your favor. Learning how to create a competitive product pricing strategy
will lead you to understand how to stay one-step ahead of the competition and working your way from
there. Who knows, your product price; if unique, can give you a competitive edge.
“You don’t have to be the biggest to beat the biggest.” – Henry Ross Perot
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