Before putting a product on the shelf, it is bound to be given "value". However, many brands often worry about whether the price set can be sold well when deciding on the price of the product. Therefore, this article will share with you the pricing strategies and pricing skills common in the retail industry, providing you with references when deciding the price of the product to find the right price for your own brand.
Cost-plus Pricing
As the name implies, the "cost-oriented pricing method" is based on the cost of goods, plus the bonus amount as the final price. It is one of the pricing principles that many brands will use, and the bonuses of different industries will also be different, which can be roughly divided into "Markup Pricing". There are two kinds of Markup Pricing.
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"Additional pricing" which is usually based on the basic cost, plus a "multiplier" price. For example, the clothing industry usually adds a cost price of 3-5 times the amount as the final price. "Target pricing" is to set a target profit ratio, such as 15-30%, and then according to the cost and pre-payment of the investment. The price is set after the future sales volume is calculated to evaluate the feasibility. (The formula can be referenced for: target pricing = unit cost + (expected target profit margin × investment capital) / expected sales volume)
Usually, small and medium-sized enterprises will use "Plus Commission pricing". For example, assuming that you want to sell a homemade cake today, your cost may be:
Cost of commodity materials: RM 50 / per cake
Cost of workers making one cake: RM 30 / per cake
Marketing cost (estimated CPA, freight, etc. plus total): RM 20 / per cake
At this time, your total cost is RM100. If you want to make a profit of 40%, your price will be: cost (RM 100) + cost * bonus ratio (40%) = selling price (RM 140)
What are the advantages and disadvantages of the Cost-oriented Pricing method?
[Advantages]: The pricing logic is relatively simple, and the estimated income is easier to master.
[Disadvantages]: The cost structure of the brand needs to be clearly considered, and at the same time, competitive pricing and other factors must also be highlighted.
Competitive Pricing
The "Competitive-oriented Pricing” method mainly determines a reference commodity price to compete with other brands by studying the price level of competitors and other factors, and judging the competitive strength and resources of their own brand, mainly including the more common "Going-Rate Pricing"), more aggressive "Product-different Pricing" and more competitive "Sealed-Bid Pricing".
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What are the advantages and disadvantages of the Competition-oriented Pricing method?
[Advantages]: For general own brands, the control of commodity costs is relatively high, so the Competition-oriented Pricing method allows you to gain an advantage in comparison with competitive prices; the same is true if your manufacturer can give you lower production costs, it is easier to obtain price advantages.
[Disadvantages]: If the brand sets the price with "differential pricing", it is easy to compress the brand's profit margin, and it needs to cooperate with marketing methods to increase sales volume to stabilize the market; and when your pricing is higher than your opponent's price, you need to establish your commodity advantage to improve consumers' price awareness in order to stimulate Lie's competition stands out, and both methods need to be fully planned to match the sales strategy.
Goldilocks Pricing
"Three-column pricing" means using three different prices to sell a certain product, which will affect the price of a single commodity more than the specifications, combination, etc. For example, ice cream distinguishes between small, medium, and large sizes with different prices. Although they are all ice cream of the whole product, there will be some differences in specifications and equipment.
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Usually, the most common specification consumers buy is the "middle" price item, because the choice of the lowest price may make consumers think that "it doesn't seem to be very good", and the most expensive price will have the idea of "it seems too expensive and not worthy", and this behavior pattern is also related to consumer psychology, and most consumers will pursue it. A "just right" option, so that the brand can put the main presumptive product pricing at the middle price through three-column pricing, launch three combinations for customers to choose from, and create more profits.
Odd Pricing
The "Deformed Zero Pricing'' method is based on people's habit of handling complex messages with "integers", causing consumers to produce an "undervalued price" bias when evaluating the price. For example, although the selling price of RM1,000 and RM999 is only one RM short, it will make consumers think that a missing thousand digit is the illusion of "a large part less". At the same time, the last number 9 For the general public, there is a feeling of special price and discount, which makes consumers think that they can buy it at this price. It's earned.
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Penetration Pricing
"Market penetration pricing method" refers to entering the competitive market at a low price, hoping to have a place in a short time. The most common practice is to set the commodity price and directly use a discount ratio as the market penetration price.
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For example, today, if a new brand wants to enter the market, its product price was initially set at RM1,000, and the market penetration price can be set at a 20% discount of RM800, giving up the original profit space to increase sales and strive for market share. At the same time, it also shows that consumers like the idea of discounts. Psychology further drives brand revenue. This is why we often see that when some brands have just launched new products, and there are different prices of "1,000" and "800" in online stores.
Of course, if the brand often adopts this preferential pricing method, it may make consumers have a sense of "always discounting" towards your brand, so you need to be more cautious in brand marketing planning.
Loss-leader Pricing
The "Sacrifice Pricing” method mainly adopts the pricing method of deliberately setting the price of a commodity lower than the cost. After attracting the attention of consumers, it promotes consumers to bring more additional goods when placing an order, and this reduced commodity can also be called "loss leader".
Summary
After reading the above content, do you have more understanding of product pricing? In fact, there are still many pricing strategies, and different industries will also have pricing methods suitable for themselves. Therefore, brands can crawl and comb the pricing strategies of their own industries. Evaluate the brand's goods, marketing, and other resources, and successfully find your own pricing strategies!
