10 Profitable Pricing Strategy Examples for SMBs [2021]

pricing strategy examples

Introduction

Price is one of the most important “P” in the marketing mix strategy. Therefore, the first and foremost thing before putting a product up for sale is to set a reasonable price for it. However, the right price doesn’t come overnight but requires a lot of time and effort.

What is a pricing strategy and why is it so important to the success of SMBs?

Pricing strategy is an all-encompassing term referring to the processes and methodologies that the sellers use to determine how much to sell their goods and services for. It is also an important factor that will directly affect your sales volume.

How to determine the right pricing strategy for SMBs?

When it comes to setting the best price for your products, you’d better take into account the following factors:

  • Fixed and variable business costs.
  • The target market.
  • The pricing strategy of your competitors.
  • Brand positioning.
  • Long-term business objectives.

10 best pricing strategy examples for SMBs

Cost-plus pricing

Cost-plus pricing refers to a pricing strategy where you add a percentage of markup in the production cost of the product to determine its price. This method is the most straightforward way to set your price.

Competition-based pricing

Simply put, competition-based pricing is when prices are set based on those applied by the rivals in order to match or beat their prices. In other words, the sellers mirror their competitor’s pricing. This pricing method only works if your products are congruent with those of your competitors.

Value-added pricing

In contrast to cost-plus pricing, value-added pricing is a technique where the price is set based on how much customers are willing to pay rather than the cost of the products. By adding premium value to make your products top-notch items, you can set a high price for them. Since your products have a competitive edge over the rest, the customers will be willing to spend extra money so that you can achieve the highest revenue and benefits.

Penetration pricing

In essence, penetration pricing is the practice of nailing down a price that is lower than the market price to catch the attention of consumers. This type of pricing strategy is helpful for small businesses first entering the market. Especially, when giant players heavily dominate the market, a lower price will help your products stand out as being more competitive than the rest.

Skim Pricing

In contrast to penetration pricing, skimming pricing is the act of marketing products at high prices during the launch of a product. It firstly targets consumers having low price sensitivity. Then, when the demand decreases, the sellers will gradually lower the price to capture the rest of the market. Instead of maximizing sales volume, businesses want to earn the highest profit in such a short time.

Premium Pricing

Premium pricing is a pricing strategy in which the sellers will set a high price throughout the life cycle of a product. The sellers create a perception that their products are of a higher quality than those from their competitors, with some high-end features.

Dynamic Pricing

Dynamic pricing, or price discrimination, is the method of setting different prices for the same product. Based on changes in supply and demand, market conditions, or seasons, the sellers have price flexibility to maximize their profits.

Bundle Pricing

Bundle pricing is a pricing method in which sellers combine lots of single products into a comprehensive package deal and sell it at an all-inclusive reduced price instead of selling them separately.

Economy Pricing

The merchants often use economy pricing for generic and commodity goods with a focus on sales volume to gain profit rather than price. In other words, you charge your product at a low price to attract more consumers. Therefore, you can sell a larger number of items on a consistent basis, with the largest customer base to increase the revenue. In particular, you set the prices at the amount including the production cost and a low-profit margin.

Psychological Pricing

Psychological pricing is a pricing method where the price is set based on psychological phenomena. There are four common forms of this pricing technique:

What is the best pricing strategy for SMBs?

There is no one-size-fits-all approach. As the market always changes, you will not get complacent with your pricing. Therefore, you should regularly adjust and re-evaluate it. A test-and-learn approach is necessary to find out a well-rounded pricing strategy.

Conclusion

On the whole, value-based pricing, competitor-based pricing and cost-based pricing are probably the bread and butter of most businesses. However, keep in mind that pricing is not a static factor, which means you have to tweak it to suit a constantly changing market.

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