- Pricing Strategies Planning For Brand And Profit Maximization
- Pricing Strategies Planning For Brand And Profit Organizations
New pricing plans attract customers by providing ownership options, mitigating uncertain value, offering price assurance, and overcoming financial constraints. Offer product versions. One of the easiest ways to enhance profits and better serve customers is to offer good, better, and best versions – or bronze, silver and gold if you prefer! Penetration pricing is a pricing strategy where the price of the product is initially kept lower than the competitors’ products to gain most of the market share and to trigger word of mouth marketing. Even though this strategy leads to losses initially, it results in many customers shifting to the brand because of the low prices.
Pricing is one of the classic “4 Ps” of marketing (product, price, place, promotion). It’s one of the key elements of every B2C strategy.
Yet for many B2B marketers, the pricing strategy in their marketing plan is challenging to write; many aren’t even involved in creating their pricing strategy.
There are many factors to consider when developing your pricing strategy, both short- and long-term. For example, your pricing needs to:
- Reflect the value you provide versus your competitors
- Match what the market will truly pay for your offering
- Support your brand
- Enable you to reach your revenue and market share goals
- Maximize your profits
Note: You can access guided pricing strategy templates and step-by-step instructions for writing the pricing strategy section of your marketing plan in our marketing planning and management app. Try it free!
When you offer a truly unique product or service with little direct competition, it can be challenging to establish your price. Define a strong strategy and competitive analysis so you can view:
Pricing Strategies Planning For Brand And Profit Maximization
- What your prospects might pay for other solutions to their problems
- Where your price should fall in relation to theirs
Pricing Strategies Planning For Brand And Profit Organizations
When your price, value proposition and positioning are aligned, you’re in the best situation to maximize revenue and profits.
Deviating from Your Pricing Strategy
If sales are slow, many companies lower their price. That’s not always the best option. Here are three price change examples:
| HIGHEST PRICE | AVERAGE PRICE | LOWEST PRICE |
|---|---|---|
| Company A is one of the best consulting firms in the world. Their consultants come from top schools, and they work with Fortune 100 clients to implement complex, large-scale projects. Company A’s value proposition is product leadership. Their clients are buying the best expertise they can find, and they’re less sensitive to price because they care most about getting top talent. Therefore, Company A’s services can be priced as high or higher than their competitors. | Company B’s value proposition is operational excellence, so their price is important. There’s a lot of competition and their product is only slightly better than the alternatives. Company B’s messages focus on their product value with a secondary focus on price. They regularly review the market, run promotions, and adjust prices to maintain their competitive position. The company is also working to develop a premium product that can warrant a higher price. | The market cares most about price because the product is viewed as a commodity. Company C focuses on finding new ways to lower costs and pass savings on to customers. Their value proposition is operational excellence and they consistently deliver the same product at a better price. Company C regularly evaluates their competitors’ prices to make sure they’re delivering on their promise. If a competitor runs a promotion, Company C counters with a better one. |
What would happen if these companies used a different pricing strategy?
| HIGHEST PRICE | AVERAGE PRICE | LOWEST PRICE |
|---|---|---|
| By dropping their hourly rate, Company A gains more clients. They hire more consultants, but since they’re charging less per hour, they can’t afford the same top-tier talent. Company A is putting their “prestige” brand in jeopardy. However, if there isn’t a strong market for prestige, this strategy may be the best one for the company long-term. | If Company B charges a premium price for an average product, they’ll have a very difficult time generating interest in their it. Yet Company B may be able to implement a small price increase to raise revenue and profits; it depends how much more its customers are willing to spend. By analyzing price sensitivity and testing different prices, they can evaluate the strength and potential of this new strategy. | If Company C’s prices rise in relation to those of their competitors, sales will plummet – their market is shopping on price, not factors like product leadership or customer intimacy. If Company C cannot maintain its operational efficiency and cost leadership, it will need to develop new products or markets for its existing product. |
Do you see your company in one of these scenarios?
| Best Case | Neutral Case | Worst Case |
|---|---|---|
| Company A provides a premium product, sold through carefully-selected retail outlets. Their pricing is typically 15% above the competition – they’re the most expensive product in their class. Their demand curve is relatively inelastic, meaning that their market isn’t that sensitive to price. Much of that results from the carefully selected positioning and branding over the past five years. | Company B charges an average price for an average product. When they’re behind their sales targets, individual reps are given the green light to discount if needed to meet their sales quotas. Management doesn’t want to get in a price war, but is willing to ensure that they hit their short-term numbers. Management knows that they could spend more in R&D to differentiate their offering and have greater pricing power, but they haven’t yet committed the budget to do so. | Company C provides business consulting services. To grow, they drop their hourly rates by up to 40%. This gives them access to an entire new set of clients. Low rates mean they can’t afford the same top-tier consulting talent. The quality of their offering suffers, and they end up providing mediocre service for both markets. By lowering the price of their “prestige” brand to access a new market, Company C has increased its revenue, while reducing its profit margin and damaging its brand. |
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after designing your pricing strategy
once you’ve finalized your pricing strategy in the marketing plan, it’s time to design your marketing campaigns.
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