The relevance of a pricing strategy

From a strategic perspective, pricing is an important tool that companies can use to optimize their revenue. Many companies set their prices without paying much attention to them. This is a missed opportunity! Applying a pricing strategy and thereby optimizing the price can be a strong driver for growth. This seems obvious, yet relatively little attention is paid to it.

A price represents the monetary value of a service or product. Understanding the value of the service arises from a set of elements such as brand, customers with a specific need and the extent to which the product or service meets that need.

Pricing Strategies

A pricing strategy is different for every company. Product, services and market are different, but the approach and beliefs of a company also play a role in determining the right strategy. Still, there are some basic pricing strategies that can serve as a starting point.

Examples of these are:

  1. Cost based plus pricing: This is one of the simplest pricing strategies. The price is based on the cost of producing the product or service. The selling price is established by adding a margin. A cost-based plus pricing strategy, however simple, is mainly suitable for physical products.
  2. Value based pricing: Another pricing strategy is a value based pricing strategy. The price is determined based on the willingness to pay of customers.
  3. Dynamic pricing: In industries with fluctuating demand and a fairly fixed stock, it is possible to work with fluctuating prices. Dynamic pricing responds to the constantly changing demand for and needs for a service or product.
  4. Price Skimming: A price skimming strategy aims to charge a maximum price in the market that decreases over time to acquire a larger market share
  5. Bundling/ Unbundling: With a bundling or unbundling strategy, certain product features are included in, or not included in, the price. In this way an attractive offer can be made for different customer groups so that turnover is optimized.

Choosing the right strategy depends on various facets, such as the market (size, maturity) and market position, the type of service or product (B2C, B2B), etcetera. The customer’s perception of price and willingness to pay is more important than their own view of the market. In the development and application of the pricing strategy, it is necessary to continuously validate with customers and make adjustments where necessary.

RevenueMindz helps companies improve their commercial business by applying Revenue Management principles. The starting point is different for every company. Starting points include:

  • Developing and implementing a commercial strategy
  • Developing and implementing pricing strategies
  • Developing and implementing Revenue Management

Did you know that applying Revenue Management can grow your revenue double digit? And that the investment in this can be earned back within a year? Are you curious how? We are please to inform you! Or see how we did this at Ocean Outdoor Nederland