For a long time I have been fascinated by wine pricing. I have noticed when I speak to wineries that many times I am told that their wine is reasonably priced. Reasonable is one of those words that mean different things to different people. Though, if you want to be successful, you have to make sure that you and your target audience share a common view as to what is reasonable, whether it’s $9.95, $89.50 or S299.
While I was researching this topic, I came across an article called “Different Types of Pricing Strategy” by Leigh Richards of Demand Marketing. The article goes considers the different types of pricing.
Let’s start with Premium Pricing, which according to Ms. Richards is establishing a price that is higher than the pricing of competitors. Premium Pricing can be an effective strategy if your product can be differentiated from others, and you have the ability to get your message out of consumers who would make up your target audience.
Another way is through a strategy of Penetration Pricing, where the company acquires market share by coming into the market with a lower price in order to raise awareness and encourage people to try the product. This will get consumers to try the product and help with generation awareness.
There is also Psychological Pricing, which creates in the mind of the customers an idea that a price is lower. For instance, as Ms. Richards says, $99 is psychologically “less” in the minds of consumers than $100. Even though we are only talking about a dollar difference, it is a minor distinction that can make a big difference.
Next time you are thinking about pricing products, start by asking yourself a few questions, including:
- Who is my target audience? Then describe the perfect customers.
- What are the customers willing to pay for the product?
Pricing needs to be considered very seriously, as it affects whether you are or are not successful. Once you have decided on your pricing, it’s time to start writing a list of reasons why your product is worth what you are asking for it. Give this list of reasons to everyone who sells your products and ask them why they think your product is worth what you are charging. That way, they will be able to tell the customers.
A tip of the glass from me to you!