What is Pricing in Marketing? | 8 Types of Pricing Strategies Explained in 6 Min! — Transcript

Full transcript

1. 0:00In this video, you are going to learn
2. 0:02what is pricing,
3. 0:04factors affecting price,
4. 0:07types of pricing strategies, and how to
5. 0:10create a pricing strategy.
6. 0:13Let's start the video.
7. 0:16Pricing is a process of setting the
8. 0:18value that a manufacturer will receive
9. 0:20in the exchange of services and goods.
10. 0:23If manufacturers set prices too high,
11. 0:26they miss out on valuable sales. Set
12. 0:28them too low, and they miss out on
13. 0:30valuable revenue.
14. 0:32The pricing depends on the company's
15. 0:34production cost and the buyer's
16. 0:36perceived value of an item as compared
17. 0:38to the perceived value of the
18. 0:39competitor's product.
19. 0:41So, different pricing methods and
20. 0:43strategies are exercised to adjust the
21. 0:45cost of the producer's offerings
22. 0:47suitable to both the manufacturer and
23. 0:49the customer.
24. 0:51The best pricing strategy maximizes
25. 0:53profit and revenue without hampering
26. 0:55customers' expectations.
27. 0:57Some of the important factors affecting
28. 0:59price fixation are: fair trade laws,
29. 1:02manufacturers make agreements with
30. 1:04dealers who retail their products at the
31. 1:06price they can be sold to the consumer.
32. 1:09Nationally advertised prices and
33. 1:11government restriction prices of
34. 1:13different products.
35. 1:15Sometimes pricing policy depends upon
36. 1:17buying habits of the customers.
37. 1:20Company monopoly, whether the company
38. 1:22has a monopoly or it is in a competitive
39. 1:24position.
40. 1:26Manufacturers' suggested prices,
41. 1:28depending upon the cost of manufacturing
42. 1:30and selling the product.
43. 1:32Type of merchandise, whether they are
44. 1:34novelties or special interest items,
45. 1:37etc.
46. 1:39Now come to types of pricing strategies.
47. 1:43Let's discuss different types of pricing
48. 1:45strategies.
49. 1:47Number one,
50. 1:49competitive pricing.
51. 1:52A competitive pricing strategy uses the
52. 1:54competitor's prices as a benchmark.
53. 1:57Cost of their product or consumer demand
54. 1:59doesn't take into account in this
55. 2:01pricing strategy.
56. 2:03With competitive pricing, you can price
57. 2:05your product slightly below your
58. 2:07competition, the same as your
59. 2:08competition, or slightly above your
60. 2:10competition.
61. 2:13Two,
62. 2:14cost-plus pricing.
63. 2:16A cost-plus pricing strategy focuses
64. 2:18purely on the cost of production of your
65. 2:20product or service.
66. 2:22You just take the product production
67. 2:24cost and then add a certain percentage
68. 2:26to it.
69. 2:27Retailers who sell physical products
70. 2:29typically use cost-plus pricing.
71. 2:32Number three,
72. 2:34value-based pricing.
73. 2:37With value-based pricing, you set your
74. 2:39prices according to what consumers think
75. 2:41your product is worth.
76. 2:43We're big fans of this pricing strategy
77. 2:46for SaaS or software as a service
78. 2:48businesses.
79. 2:50Four,
80. 2:51dynamic pricing.
81. 2:53It's a flexible pricing strategy where
82. 2:56prices vary based on market and customer
83. 2:58demand.
84. 3:00Hotels, airlines, event venues, and
85. 3:03utility companies use dynamic pricing by
86. 3:05applying algorithms that consider
87. 3:07competitor pricing, demand, and other
88. 3:09factors.
89. 3:12Five,
90. 3:13pricing skimming.
91. 3:15A skimming pricing strategy is when
92. 3:17companies set the highest possible price
93. 3:19for a newly launched product and then
94. 3:21lower the price over time as the product
95. 3:23becomes less and less popular.
96. 3:26Technology products, such as laptops,
97. 3:29gaming consoles, and smartphones, are
98. 3:31typically priced using a skimming
99. 3:33strategy as they become less relevant
100. 3:35over time.
101. 3:37Six,
102. 3:39penetration pricing.
103. 3:42Unlike the skimming strategy, in a
104. 3:44penetration pricing strategy companies
105. 3:46enter the market with a cheap price and
106. 3:48effectively drawing attention away from
107. 3:50higher priced competitors.
108. 3:52This pricing method better works for
109. 3:54brand new businesses looking for
110. 3:56customers or for businesses that are
111. 3:58entering an existing competitive market.
112. 4:01Penetration pricing isn't sustainable in
113. 4:03the long run.
114. 4:06Number seven,
115. 4:07differential pricing.
116. 4:10This method is applied when the pricing
117. 4:12has to be unique to particular groups of
118. 4:14customers.
119. 4:16Here, the pricing might vary with time,
120. 4:18according to the region, area, product,
121. 4:21time, etc.
122. 4:24Eight,
123. 4:25high-low pricing strategy.
124. 4:28In a high-low pricing strategy, a
125. 4:30company initially sells a product at a
126. 4:32high price, but lowers the price when
127. 4:34the product drops in novelty or
128. 4:36relevance.
129. 4:37Discounts, clearance sections, and
130. 4:40year-end sales are examples of high-low
131. 4:42pricing strategies.
132. 4:45Let's discuss how to create a pricing
133. 4:47strategy.
134. 4:50One,
135. 4:51determine pricing potential.
136. 4:54First of all, you need to evaluate your
137. 4:56pricing potential.
138. 4:58This is the most probable pricing of
139. 5:00your product or service in regard to
140. 5:02cost, demand, location, etc.
141. 5:06Two,
142. 5:07determine your buyer's personality.
143. 5:10You have to price your product according
144. 5:12to the type of buyer persona that's
145. 5:13looking for it.
146. 5:15When you look at your potential
147. 5:16customer, you'll have to look at their
148. 5:19customer lifetime value,
149. 5:21willingness to pay, and customer pain
150. 5:24points.
151. 5:26Three,
152. 5:28analyze historical data.
153. 5:31You analyze previous historical
154. 5:32pricing-related data.
155. 5:35Then you can calculate the difference in
156. 5:36closed deals, churn data, or sold
157. 5:39products on different pricing strategies
158. 5:41that your business has worked with
159. 5:43before, and determine which were the
160. 5:45most successful.
161. 5:47Four,
162. 5:48balance value and business goals.
163. 5:52The pricing should maintain a proper
164. 5:54balance between value and business goals
165. 5:56to ensure the price is good for your
166. 5:58bottom line and your buyer personas.
167. 6:01Five,
168. 6:03look at competitor pricing.
169. 6:06You can't make a pricing strategy
170. 6:07without researching your competitors
171. 6:09offerings.
172. 6:11You will have to decide between two
173. 6:12crucial choices when you see the price
174. 6:14difference for the same product or
175. 6:16service. First choice is if a competitor
176. 6:18is charging more for the same offering
177. 6:20as your brand, then make the price more
178. 6:22affordable.
179. 6:24The second one is you can potentially
180. 6:26price your offering higher than your
181. 6:28competitors if the value you provided to
182. 6:30the customer is greater.
183. 6:33If you want to read in details or
184. 6:35download the PDF, go through the link in
185. 6:38the description.
186. 6:40Like the video and don't forget to
187. 6:42subscribe to Education Leaves.