The pricing of products and services is always one of the most important topics in the world of sales and marketing. The pricing of products and services is one of the factors that can even affect the success rate of a business. Pricing methods are actually a process by which the value of goods or services is determined manually or automatically.
The effect of pricing is so important for a business that it can completely change the amount of sales and the amount of profit of an economic unit.
For example, to compare two similar products, often the first factor that is checked is the price of each product. Therefore, determining the price and pricing methods of goods is also very important and if it is not done correctly, it is possible to cause loss of profit, damage and problems for the business.
Pricing strategies
There are three types of general strategies for the correct pricing of goods and services, which are as follows.
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Pricing based on cost:
In the cost-based pricing strategy, the cost of producing goods and services and the amount of desired profit are determined. In this way, the price will be equal to the sum of production cost and profit. Of course, most of the time sellers such as markets and wholesalers add a certain amount to the price of the product for profit and sell it. Usually, producers determine the price of goods and services according to their expectation of return on investment. To determine the amount of return on investment, they also check the average profit of the industry.
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Pricing based on the value of the product in the mind of the customer:
In the pricing strategy based on the value of the product in the mind of the customer, the producer determines the price of his product or service according to the value he has created in the mind of his audience. Now, this value depends on several factors, including the quality of goods and services, appropriate treatment of sellers, appropriate services, etc. For example, customers buy Apple mobile phones because of the good feeling that the Apple brand has created in their minds, while there are other brands of mobile phones in the market, which have the same capabilities as the Apple brand.
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Pricing based on market conditions:
In the pricing strategy based on the market conditions, manufacturers examine the prices of similar goods and products in the market and determine how much customers are willing to pay for the desired goods and services. In fact, one of the easiest ways to determine the price of goods is this method.
Types of pricing methods
One of the most important factors affecting the customer’s decision to buy or not to buy is the price of a product; Therefore, the right product pricing strategy is a very important factor in the growth of your business. Providing better products than other competitors and using the correct steps in choosing a strategy to achieve a favorable position in front of competitors are important principles to achieve profitability in the business model; Therefore, a company should be able to price its products in such a way that it can obtain revenues in proportion to the value provided to the customer and in this way maintain its position in relation to customers, complementary goods, competitors and potential new entrants.
Pricing is the most important part of the business model and decisions about it have a great impact on the profitability of the company.
1- Non-penetrative pricing method
Businesses that introduce a new product to the market for the first time in order to earn more money from different layers of the market, first set the price at a high level, and after the initial sales volume has decreased, the price is slightly reduced to lower prices. other markets or they produce goods with the same characteristics but cheaper for the desired sectors. It should be noted that the use of this method should be supported with regard to the high quality and favorable mental image of the consumers and the number of its buyers should be sufficient. May the cost of production be reasonable and competitors cannot enter the market easily.
2- Penetration pricing method
Some businesses, in order to quickly and deeply penetrate the market, set the selling price very low at the beginning of the work in order to gain a significant share of the market in a short time, and with increasing sales and reducing production costs, the prices reduce the sales again, this pricing method is applicable in markets where the selling price has high elasticity and demand increases with the price reduction, it should be noted that with the increase in sales volume, production and distribution costs decrease Findings and price changes should be such as to prevent competitors from penetrating the market.
Sometimes, a business that wants to introduce a new product to the market by imitating existing products will face the problem of determining the right place for its new product, and in this case, it must choose the right place for the product in terms of quality and price. to decide In the product mix pricing policy, the business seeks to achieve the profit it gets from the sale of all its products, and therefore pricing several categories of products according to the final price and the demand level of each market is difficult and considering The existing conditions follow different methods.
3- Product line pricing method
We may have several production lines with different functions, prices and customers to produce a product, so the pricing structure in this method is designed based on the product group.
4- Optional pricing method
In this method, the product price depends on the additional items and accessories included with the main product, and the customer has the right to choose these additional items and accessories, such as buying a car with additional equipment.
5- Mandatory pricing method
Some businesses produce products that must be used together with the main product, and therefore these businesses use the mandatory pricing method, such as photographic film that requires a camera to be used, and businesses who have produced both, try to keep the price of the camera at a low level and get their reasonable profit through the sale of film, so this policy is also called two-part pricing, because in this way, the service is divided into two parts. Fixed and consumption rate of goods are divided.
6- Pricing of by-products
The production of chemical products is usually accompanied by waste and other by-products, which if these items have no value and their destruction requires payment, it affects the pricing of the main product, and if the by-products are sold for other purposes, it causes the price to decrease. It will be the original product.
7- The method of pricing together
Sellers often offer several items of their products together, the price of which is lower than individual products, this pricing method increases the sales volume of products that probably cannot be sold separately under normal conditions, or the amount of sales They are very low according to the demand level of the entire consumer society.
8- Discount pricing
A reduction in the selling price for buyers who pay their bills ahead of time by providing a cash discount to distribution agents will improve business liquidity and reduce the cost of doubtful receivables. The greater motivation to buy in customers will reduce the cost of storage and transportation for the business. Sellers sometimes give special discounts to the members of the distribution channels such as retailers and wholesalers in exchange for performing special services such as sales promotions, reducing the selling price outside Shopping seasons as seasonal discounts and super discounts are other practical sales methods.
9- Discriminatory pricing
The price of goods sometimes changes due to the differences between the level of customer demand, the type of products, different geographical regions and different seasons of the year, therefore, in order for the discriminatory pricing policy to be successful, special conditions are necessary, such that the market can be divided and the amount The demand in different parts of the market can be investigated and the costs of monitoring the market should be reasonable. Meanwhile, the conditions should be determined in such a way that the competitors cannot influence the market prices and damage the reputation of the business by causing dissatisfaction among the customers.
10- Psychological pricing
Psychologically, the higher the price of a product, the higher the consumer’s mental perception of the product’s quality. arises, most psychologists believe that each number has its own visual and symbolic properties and therefore it is very important to pay attention to it when pricing and it should be considered by relevant experts.
11- Advertising pricing
Sometimes businesses temporarily set the selling price below the cost price in order to advertise the goods and in a way, by sacrificing some goods, they try to sell other items of their production, and on special occasions, they auction the desired goods and provide services after Selling for free attracts the attention of customers.
12- Geographic pricing
This method is different depending on the supply of goods in different regions and a specific price is determined based on the characteristics of each sales region. Increase in costs by using the advice of marketing and advertising experts to control the prices and somehow separate the price of goods from the services of goods, in front of the change in market prices, competitors and buyers react differently, which affects the market and The industry is very important and should be carefully analyzed by the relevant experts.
