While developing your pricing strategy, it is important to remember that there is an implicit relationship between price and value. We expect to pay more for gourmet food than for fast food and for a luxury car than for an economy model. At the same time, value is a matter of opinion, not fact.In order to get this information, you need to use a research tool that will give you the data in a clear, concise, objective manner. Because if you are researching eBay pricing and sell-through rate data by “eye-balling it” on eBay, you’re very likely going to miss something.Product line pricing strategies can be further complicated by competitive activity by product, not exclusively by line. If you have five competitors for one of your products in the line, and then only two competitors for the other products in the line, you might use a different price strategy for the product with lots of competition, than the other line products.The challenge for businesses with this strategy will come from having too many competitors in the market. If there are too many competitors, each with a full line of products in the varying stages of the product life cycle, buyers will find it difficult to make decisions based on quality or service or value for the price.For new product in a new market, the cost mark-up is the most popular method. There is no need to think about pricing at all, just simply add an amount of profit on top of the cost and that is the final price.
At first, the method may seem attractive but eventually the sellers will find out that their profit is not up to their expectation, and the customers are suspicious of the attractive price.Pricing your product or service is one of the most important issues that you need to tackle. You must be wondering as to what is the procedure to follow to develop the best pricing strategy for your company. While there is no particular approach that you must adopt, definitely, there are some important things that you should bear in mind while creating one.Other factors that affect your pricing strategy are the economics of your business. Depending on the current situation of your business’s performance, your mark-on has to ensure sufficient profits to sustain your business. Sometimes, to increase your sales volume, you can lower your mark-on to price selected merchandise.Today’s buyers prefer to waiting for the 1st price reduction before they come in – to see some flexibility on the part of the seller.
The bigger the “hair cut” the more assured the buyer feels about getting a deal. A steal, even! Exactly the same way one feels at the mall when a $400 jacket is on sale for 75% off!Businesses using market penetration pricing are usually trying to penetrate the market by growing their share of the market. They assume that the lowest price will win market share. Make sure that if you use this pricing strategy that you test your market, your price sensitivity and your price elasticity or in-elasticity first.This pricing strategy is also used in product line pricing. This strategy bundles, and usually packages, like products together to be priced as companions (for example, a mixer and a mixing bowl) and as captives (for example, pens that have to have a specific refill (not generic), razors that can only use a specific blade, etc.).