Pricing is one of the first things your customer would look at while considering your product or service for decision-making. It describes your product’s worth and communicates how much you care about your brand, customers, and the product.
Pricing is the sum you charge for your product, and pricing strategy is how you calculate that number. Shifted market pricing is challenging, which is why a robust strategy is critically important for your business growth in the future.
Here is an extensive guide on everything you should know about the strategies related to the shift in market pricing. Let’s first develop an understanding of it and cover how it affects a business.
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Let’s begin!
What is Shifted Market Pricing?
Shifted market pricing is anticipating changes in the shifting market and prices for your business future and managing your Pricing accordingly. It occurs when there is a significant change in the industry’s structure, supply, or demand.
When a company faces inflation and decides to raise, the prices could be an example. Devising a strategy for shifted market pricing takes a lot of data analysis, planning, and insights. You can turn the pricing shift into a powerful tool for your business growth with the right shifted marketing strategy.
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Importance Of Pricing Strategies
With increasing pressure and volume, remaining competitive in the market with the right approach to Pricing is essential. It brings value and growth, which your products and services deserve. Pricing strategies are practical methods of finding the best prices for products in the present market.
Depending on your company, you may choose which pricing strategy works best. It involves industry trends, customer behaviour, and competitor pricing while helping companies to identify optimal prices for their offerings. It also helps maximise profits for your products in the market.
Only a few inelastic products will need a specific pricing strategy as the demand is guaranteed; however, the market shifts. It includes industries like salt, fuel, etc. For increased benefits, a shifted pricing strategy would be beneficial to make precise changes even before you observe a drop in sales.
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Here are some benefits of using a shifting pricing strategy are as follows:
- Increased profits: With a higher price, you can observe an increase in profits by raising your prices.
- Increased demands: The demand for your products may increase while keeping the prices lower than the alternative products. However, make sure that customers choose your products rather than your competitors.
- Increase market share: In price-sensitive markets, pricing products can help increase market share and optimise profits.
- Pricing Policy: A unique pricing policy from your average competitors can help you differentiate your products from the market. It can also build brand equity in the market through where customers perceive your product to be of high quality by charging premium prices.
A business owner has to change the pricing strategy in the dynamic market to compete better, also known as the Shifted market pricing strategy.
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What Could Be The Possible Drawbacks?
The pricing strategy could be beneficial to stay competitive in the market if used the right way. However, there are a few drawbacks that you must consider before you get started.
Relying on companies competing with your products can lead to a race that leads your business to the bottom, as the focus would shift to lower prices rather than quality products.
It can hamper relationships, lead to price wars between companies, and crumble profits.
Constantly shifting prices can lead to confusion for customers to compare different shops and make decisions.
The key is to find a balance between the price the customer is willing to pay and your profit margins.
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Best Shifted Market Pricing Strategies
Here is the list of the most common and effective strategies for shifted market pricing.
Value-Based Pricing
As the name suggests, here, Pricing is set based on the value perceived by the customer for your services and products where you know what the customer would be ready to pay, providing your customer with value in exchange for the money.
This strategy is often used as a feature when your business has a product that your competitor market still needs to get. It can include anything from excellent customer service and experience to effective service or product design. It can be used when there is a sudden change in the market, and a price change is essential.
Competitive Pricing
A competitive pricing strategy is the most straightforward, which involves matching or beating your competitor’s prices on certain products. It can be adopted if you urgently need a pricing strategy and are new in the market. You can make a price reduction, price increase, and price match, keeping your competitor’s value as a benchmark.
However, it is not helpful if you want to gain an advantage over your competitors and outperform them. Competitive Pricing is also known as competitor-based Pricing and is easy to implement as most of the hard work is already done by your competitors.
Setting your product’s price lower than your competitors in a highly competitive and saturated market is practical. It will be an add-on if you offer something unique that your competitors don’t.
Penetration Pricing
Penetration pricing, also known as access rate, is a common strategy used by startups and an effective way to break into a competitive market. You can generate high-volume sales and start generating trust with customers.
While implementing this strategy, building trust and loyalty is the most important thing. However, it is not sustainable as prices will eventually rise, and you need to retain your customers.
Skim Pricing
Skim price, also known as price skimming, is when a company sets prices high and lowers them with time. Mainly it is used in the smartphone industry, where new phones are released with eye-watering prices for the market-leading features of their products.
This strategy is helpful for a breakthrough product or service to maximise profits in the shortest period and recover its sunk costs. It can be adopted when you want to get your investment faster. You may check out the case study for Apple and Samsung to understand how it works in detail.
A first mover usually uses this strategy with little or no market competition. Many companies still use it to maximise profits whenever a new product is launched. However, it is not a viable or long-term strategy.
Premium Pricing
It allows the company to set higher prices for the services or products perceived to be of higher value by the customers. Here, you need to set a value proposition first with in-depth prior research that differentiates you and your product from the competitive market.
Premium pricing is also known as prestige or luxury and is common among technology, fashion, and automotive brands. This strategy is more useful in a Business to Customer (B2C) environment.
Economy Pricing
This pricing policy involves offering the products at a lower price to generate less revenue. However, this strategy makes up for it by selling in greater volume. Making a loss on each unit helps attract customers who spend money on more profitable products.
It is a pricing strategy where products have lower prices due to lower production costs. It allows businesses to price products according to production value as they do not acquire extra marketing and advertising costs.
Dynamic Pricing
Also known as time-based or surge pricing, it uses algorithms to check factors like demand, seasonality, and Pricing of the product in the market. It is common in airlines, utility providers, or hotels where algorithms are sophisticated and complex to find the price the buyer is willing to make when he is ready.
Below are a few types of Dynamic Pricing:
- Time-Based Pricing
- Segmented Pricing
- Peak Pricing
Geographic Pricing
As the name suggests, it is a strategy based on the geographical location where the product or services are based. Companies that serve internationally must consider this as a beneficial strategy. However, even for a local market, the prices may vary depending on the product.
It includes the cost of living at different locations and products being offered at a place that has less of it available locally. Here, prices are also differentiated based on the product’s demand, where it is either competing with its rival products or the product is exclusive.
Psychological Pricing
It is all about human psychology to sell a product or service. The most common is the 9-digit effect, which is a better deal if the product is priced at 99.9 rather than 100.
Artificially inflating the product’s Pricing is also an example where the price of one product compared to another seems like a better deal.
It includes four different types of psychological strategies:
- Artificial Time constraints
- Charm Pricing
- Innumeracy
- Price Appearance
With a psychological pricing strategy, you can provide a sense of urgency and change the perception of your product.
Bundle Pricing
It is a strategy where several products come together into a bundle and sell them at a single price, converting a bundle into an individual product. It is effective in several ways:
- To sell excess stocks, bundling weaker sellers with stronger sellers.
- To offer a more competitive price of the bundled products than the price if sold individually.
- Encouraging buyers to try newly released products, bundling new products with established ones.
Any company can use this versatile strategy to motivate consumers to buy bundles and save money.
Hourly Pricing
Hourly Pricing charges each hour with a flat fee, which is most often used by freelancers, consultants, contractors, and other service-based businesses. If you offer an efficient and skilled service, this model can attract many people wishing to pay for a shorter project than a fixed fee. However, in case of inefficiency, it can be inaccurate to choose this strategy.
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How Shifted Market Pricing Strategy Works?
Shifted market pricing strategy is a marketing strategy that helps to set the price of a product based on the competitor’s prices for similar offerings. There are different approaches that a company can take while using market-based pricing strategies for entering a fresh market and gaining market share.
The most commonly used strategy is shifting, which involves adjusting the price of your product or service price based on the downfall or growth of similar products in the market.
Suppose your competitor, company A, decides to increase the product’s price. Using a shifting pricing strategy, you can lower your product prices to remain competitive.
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Implementations:
- To start with, historical research data and finding the pricing process for similar services or products. Look for industry success, failure points, and trends to check if you can take advantage in case of any shifts.
- Collect qualitative and quantitative data to build buyer persona through social media, direct outreach, feedback forms, etc.
- You can look for more data and adjust your prices once you understand the market better. Your value or price must give your company a competitive edge to attract customers towards you rather than the competitors.
- Determine the best value that aligns with the customer’s needs and requirements. Value is subjective, so finalising the pricing strategy applies to the price system that works for you. Make sure to keep an eye on your competitors and make up your mind to adjust your prices as needed.
Companies need to be careful before implementing any shifts. It can be risky when it comes to unpredictable, quick, and irregular fluctuations in market prices. However, it is an effective way for many to enhance their business and quickly respond to the changes.
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Time To Create Yours
With a little bit of strategic thinking and a proper approach, you can quickly implement the market pricing strategy; however, it is crucial to remember that Pricing is an iterative process. It needs consistent evolution of the strategies along with your business and requires dynamic solutions each time you develop one.
Keeping all the pros and cons in mind, you may start working toward your strategy.
