How To Create a Successful Pricing Strategy

by Andrew Reed, on Apr 19, 2022 3:30:00 PM

Many businesses will make the mistake of setting prices without much consideration, putting them at a disadvantage right out of the gate.

Making sure prices are affordable is one thing, but there is much more to consider when setting product prices and marketing your business.

Below we will cover what you need to know when pricing your products, as well as different types of pricing strategies and their advantages and disadvantages when it comes to different products and verticals.

--Article Continues Below--

New call-to-action--Article Continues Below--

How To Create and Select A Successful Pricing Strategy

 

  • Calculate Your Costs

Knowing how much it will cost to produce and deliver your product, on top of your other overheads, is the first step in determining your pricing strategy.

The easiest way to do this is to find the sum of your materials, labor, and other overhead costs of manufacturing.

 

 

[source]

 

Direct labor and materials generally refer to the cost of the raw materials and then the costs of production and labor (being salaries, benefits, and other wages) to turn those materials into a finished product.

Once the product is complete, you will then need to calculate an average shipping cost.

In the end, you will have a general sense of how much it will cost to produce the product and get it to your customers, giving you a jumping-off point to build your pricing off of.

  • Define Business/Brand Goals

Next, you want to make sure your pricing aligns with the goals and brand of your overall business.

Is your goal to penetrate the market by offering similar products at discounted prices? Or do you have a new quality product you are trying to sell to a high-end market?

Your prices will play a key part in how your customers perceive your brand, and if they are not aligned with the overall objectives of your business, you may end up struggling to find a customer base. 

  • Create Buyer Personas

A buyer persona is a fictional representation of your ideal buyer, based on data and insights you can cultivate by interviewing current or potential customers, reviewing your website analytics, and talking to your sales team to see what kind of leads they have been most successful with.

The most effective buyer personas will cover everything from age and location, to education level and career goals.

 

[source]

Brainstorm who you think you're selling to by asking yourself what kinds of problems your business is trying to solve, and for whom you are solving them. 

Then, back this up and expand upon it by checking your web analytics and speaking with your sales team to see what kinds of leads they're getting.

Once you have dialed in an ideal buyer persona, you will have a better understanding of what that person will be willing to pay for your product or service. 

  • Analysis Your Market

Next, take the time to analyze your competitors and how they leverage their products. Take note of how much on average competitors are charging for their product, and try to nail down why.

Are they selling quality products at high prices, or have they taken the discount approach? Is there a problem, or niche, their products aren't addressing? Where can you fill in the gaps?

Once you have an idea of how competitors are reaching their customers, and how your products fit into the market, setting prices to outbid your competition or garner interest in a more premium product, will help you corner a customer base to sell to.

Wrapping Up

When setting prices, you need to think about more than just covering your costs. Moving out of date products, setting your brand reputation, and discovering where your business may fit into a competitive market all play an important role in your pricing strategy.

Once you have brought all these factors into consideration, you can start narrowing down your approach and in on your customer base.

Our blog

Where businesses come to learn more about protecting the points of digital engagement with their customers, audiences and users.

Subscribe to Updates