The Best Pricing Strategy For Your Business Success

The Best Pricing Strategy For Your Business Success

Pricing strategy is one of the crucial aspects that determine a business’ success. Putting in the right price on a company’s products will allow them to make a profit. 

However, if they give the wrong price, their business may suffer losses and even go bankrupt. Research conducted by McKinsey and A. T. Kearney found that increasing prices by 1% can increase profits by 7 to 11%.

That being said, businesses have to be careful in determining the pricing strategy for each of their products so that they can gain the desired profit and avoid the risk of failure.  

Then, what is the best strategy for your business?

Pricing Strategy

Pricing is the amount of money or equivalent exchange tools that have to be paid for products or services in a period of time and in a certain place. 

While a pricing strategy is a method used to determine the best price for a product or service. However, putting the right price is not as easy as it seems. 

Many factors need to be considered when developing a strategy, several of them are the desired profit, target market, marketing objective, attribute of products, and the brand position. 

In addition, pricing can also be influenced by external factors like consumer demand, pricing competition, market trends and so on. Pricing tells us the worth of products or services. Hence, in order for businesses to succeed, businesses must charge the right price. 

The Types of Pricing Strategy

First, before businesses determine the price, they will look into the target market’s socioeconomic status, lifestyle and other variables.


Adding to that, businesses need to take into account pricing elasticity, be it inelastic products or elastic products. Inelastic products are products in which the customers will continue to purchase even though the price is increasing, cigarettes and oil for instance.

Elastic products, on the other hand, are price-varying products, one example of which is a TV cable. 

Therefore in regards to that, to create a pricing strategy, it is essential to first understand the types of pricing strategies a company employs. Here are some of those strategies.

Price skimming strategy 

Price skimming strategy is an approach where companies set a high price in their initial launch, however, the price will eventually be lowered from time to time. 

The strategy is often used when the product is new on the market. The goal for implementing the strategy is to gain revenue as high as possible when consumer demands are still high and before any competitors enter the market. 

Following these goals, companies then will gradually lower their price in order to attract consumers who are sensitive to price. This strategy is the best suited to be implemented if there are these factors,

  • Enough consumers are willing to purchase a product, regardless of the high price. 
  • The high price doesn’t attract competitors.
  • The high price describes the high-quality products.
  • Lowering the price will only give a negative effect on selling and reducing unit cost. 

Market penetration pricing

In contrast to price skimming strategy, a market penetration pricing strategy sets a low price at the first launch. The strategy lowers the price, but in the end, the price goes up over time. 

Putting a lower price enables the product to penetrate the market and bring the consumer to purchase the product. In this strategy, people are made aware of the products and encouraged to purchase them. In addition, the strategy assists to expand the market share. 

Please keep in mind,

challenge is how to keep the consumers so that they continue to use the product even after the price returns to normal. The solution is to maintain product quality so that consumer retention can be ensured.

Cost-plus pricing 

The strategy is often used by retail companies such as clothes and supermarkets. The cost-plus pricing strategy adds a fixed profit percentage to the production cost of one unit.  

The strategy is also known as markup pricing, which focuses on internal factors like production cost rather than external factors like consumer demand or competitor pricing.   

Value-based pricing

The next pricing strategy is value-based pricing, which is based on the perceived value  of a product or service by consumers. 

We can say that this strategy is customer-oriented in which companies set the price according to how customers believe in products’ worth. Companies that offer unique and high-value products are suitable for using this strategy. 

Competitive pricing

This strategy is used by companies that set the price of their product using competitors as their benchmark. This is typically used by companies where their product has been on the market for a long time and can be replaced by other products. 

Generally, companies will conduct in-depth research related to the price set by competitors. Then, companies will set the best price for their product based on the research.

How to Conduct Pricing Analysis

After understanding the meaning of pricing strategy and its types, the next step is to perform a pricing analysis. Here are the steps:

Determining the real price

First, you must figure out the real price of a product starting from its production to delivery in the market. In order to understand it, companies can add up all costs including fixed costs and variable costs.

Understand your target market 

You need to identify your target market and have a better understanding of them. Companies can do several approaches to meet the goals such as performing a survey, questioner, or focus group.

Those approaches will assist companies to have an insight into how the market responds to the pricing strategy that they have been using. In addition, companies have also gained an insight into how consumers value a product and how much they are willing to pay for it.

Pricing analysis sets by competitors

Companies can perform analysis on pricing set by competitors both direct competitors and indirect competitors. 

Direct competitors are companies that sell the same products, while indirect competitors are companies that sell alternative products where consumers will purchase them if the main product is out of stock.

Mainly you need to analyze your direct competitors’ marketing strategy  since they sell the same product as your companies, which is usually, they will compete through price of their products.

Find the Right Pricing Strategy with LOKASI Intelligence 

In order to determine the proper pricing, companies need to perform thorough research including understanding the target market. Having complete information regarding the consumers will assist companies in determining the price.

By using LOKASI Intelligence, businesses can conduct customer profiling where they can gain information about their target customers such as demography, socioeconomic status, lifestyle, people interest, and so on.

Those data will allow businesses to determine the right pricing strategy for their products or services. 

Find out more on how businesses can expand their business effectively by using LOKASI Intelligence by contacting or WhatsApp at 087777977731.

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