How Small Businesses Can Structure Competitive Pricing

June 26, 2020 | By:Neilson Marketing Services

Determining how much you should charge for goods or services is not as simple as it seems. Pricing too low or too high can either put your business to stand at the same level as that of your competitors or better yet, outplay them. Your ideal target market will consider your pricing strategy to be a deciding factor on either supporting or ignoring your marketing efforts. At any rate, the overall pricing strategy is just as important as putting together a successful business plan. Not knowing how to go about your pricing is detrimental to your business’ success. Let’s dive into this further. 

Importance of Knowing How Much to Charge

Hear us out for a second and think about it – Why is it that with each release of an iPhone, the price goes up, even when there’s minimal technological variances between models? An iPhone is pretty expensive too amongst other brands. Why is this the case? Making a choice to pursue an iPhone is also about trusting the brand. You are aware how Apple stands against other service providers. You trust their craftsmanship and quality of work. As a result, you end up buying each new release and are loyal to the brand. 

In planning your business, you ideally would like the same to happen to you too. You’d like to attract your target market, invite them to trust your brand, craftsmanship and quality of work. The first step in achieving all this is through your pricing. Sporting a competitive price is like putting your foot in the door and challenging your market to judge your business’ worth.

Pricing Strategies

Not investing much thought and strategy into it can result in your business’ demise. So that this does not happen to you and your business, here are a few factors which can help you come up with a better pricing strategy:

  1. Competition-based – This methodology makes more sense to use on business products. Whatever the competition’s pricing is, use it as a starting point to propose a higher rate. In return, propose better payment plans and add in a few additional features to convince the market to purchase. The more “premium” the product is, the more appealing it looks to your target market. 
  1. Value-based – How unique is your offer? What makes it different from other sources? Knowing how much value you bring to the table can guide you on how to go about your pricing. Find out how your product or services help solve problems. Unlike the first strategy, value-based strategy is based on the ideal customer’s perspective against the product or services’ value. 

Restaurants are highly likely to implement this form of game plan. They review the competitor’s menu and then add ingredients in order to raise the pricing. Marketing teams are involved and are tasked to find ways to justify price inflation. 

  1. Penetration Pricing Strategy – This type of approach is perfect for businesses as they attempt to gain entry to another market. The strategy is to keep the pricing low at first and then eventually increase over time. As the business owner, you get to decide just how much you would like to be charged, based on your value assessment on goods and services, as well as the loyalty you’ve established for your brand. 
  1. Premium Pricing Strategy – On the other hand, this category is a perfect match if you’re working with high quality or luxury items. The perceived value is far more important here than anywhere else. It’s possible to receive different types of offers including being exposed to discussions on basic to enterprise and unlimited versions.

While there are several pricing strategies to choose from, there are a few things that may help simplify the entire process for you:

Don’t get too low – If the pricing is too low, you are basically opting to work with low quality clients as well. 

Patience is a virtue in Pricing – In order to guarantee massive net profit, it’s important to acquire an understanding of how the market works. After which, you may slowly increase your pricing within 6 to 12 months. 

Know your market – Again, research is key in fully understanding the behavior of your ideal client and knowing how to use this knowledge to your advantage. 

At the end of the day, structuring a business and figuring out pricing requires a lot of time, research and strategy. To protect your operation from the ground up, secure a CA general liability policy for additional peace of mind.

About Allegiant Insurance Services

At Allegiant Insurance Services, we specialize in providing personalized and tailored insurance solutions to fit your individual needs. We pride ourselves on providing cost-effective policies in the home, business and auto markets with a human approach. Contact us today at (858) 771-2000 to receive a free quote or to speak to a reputable and helpful agent. 

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