Make Sure the Price Is Right with Market Research
The promise of the new year lies ahead. One way to help ensure it’s a profitable one is to re-evaluate your company’s pricing strategy. You need to devise an approach that considers more than just what it cost you to produce a product or deliver a service; it also must factor in what customers want and value — and how much money they’re willing to spend. Then you need to evaluate how competitors price and position their offerings.
- Conducting informal focus groups with top customers,
- Sending online surveys to prospective, existing and defecting customers,
- Monitoring social media reviews, and
- Sending free trials in exchange for customer feedback.
It’s also smart to investigate your competitors’ pricing strategies using ethical means. For example, the owner of a restaurant might eat a meal at each of her local competitors to evaluate the menu, decor and service. Or a manufacturer might visit competitors’ websites and purchase comparable products to evaluate quality, timeliness and customer service.
Suppose you survey customers and discover that they associate your brand with high quality and superior features. If your target market is more image conscious than budget conscious, you can set a premium price to differentiate your offerings. You’ll probably sell fewer units than your low-cost competitors but earn a higher margin on each unit sold. Premium prices also work for novel or exclusive products that are currently available from few competitors — or, if customers are drawn to the reputation, unique skills or charisma that specific owners or employees possess.
Another approach is to discount some loss leader products to draw in buyers and establish brand loyalty in the hope that customers will subsequently buy complementary products and services at higher margins. You also may decide to offer discounts when seasonal demand is low or when you want to get rid of less popular models to lower inventory carrying costs.
Evolving over time
Do your prices really reflect customer demand and market conditions? Pricing shouldn’t be static — it should evolve with your business and its industry. Whether you’re pricing a new product or service for the first time or reviewing your existing pricing strategy, we can help you analyze the pertinent factors and make an optimal decision.