There are always people who're willing to pay more for better products and services, but it's more complex than that. As there become fewer and fewer distinctions about pricing due to use of technology, transparency, the ever-connected consumer, and the ability of retailers to access information and change prices and respond to customers in real-time, there've got to be better criteria for retailers to use top retail pricing strategies, and for the customer to distinguish between retailers. What pricing will give you the most sales? What pricing will give you the most profit? How do you determine what pricing -- and when? But the most important consideration is how best to serve and win and keep the customer.
First let's take a look at some of the myths, and then we'll take a look at the strategies:
* There is some mythical perfect price to gain maximum revenue from every single sale.
* Pricing based on cost plus is the best way to determine the "right" price.
* Continuing to try to price lower than your competitor while not having lower costs is surely a losing proposition -- a price battle and "race to the bottom" as many have already said.
* Sticking with a price once you have set it.
* Changing prices too often.
* Changing prices not often enough.
* Pricing according to the competition's behavior without following your own pricing strategy.
Some of the top competitive pricing strategies for retailers:
1. Loss-leading pricing. Lure in customers with a desirable product at a highly desirable rate, and then benefit from the additional products and purchases that customer will make while they are on your website or in your store.
2. Psychological Pricing: Charging 9.99 instead of $10.00.
3. Product Bundling: Product bundling allows you to charge a unique, competitive price that can't be copied by others. Packaging things in new ways, i.e. a certain number of pieces per bag, that is different than the number of pieces per bag offered by the competition.
4. Dynamic Pricing. Each time you check there is another price -- on Amazon because they are constantly, instantaneously matching competitive prices. And you've seen it often at travel sites -- if you don't take the first price you see and search around, the original price you sought "disappears" to become a higher price the next time you return to check. Airline, sporting, and entertainment events use dynamic pricing, i.e. pricing based on the availability of seats at any given time. The greater the demand, the fewer seats available, the higher the price.
5. Premium Pricing. The perception of value. There are always people who are willing to pay more for perceived "better products and services. It's a "snob" value. Niemann-Marcus, Tiffany's…
6. Pricing Because You Are Apple. Price high because you can! That would be nice for everyone, but Apple has peeled out a special niche, i.e. very few have a particular audience that follows them like a puppy -- happy with whatever price you ask, have the need to be part of a (perceived) elite community that "knows" and "has" something that others don't have.
7. Freemium. You'll find this more in services than in commodities. These are services that are offered for free, and then one can be enticed to pay for additional services once they are hooked. e.g. Skype. Basic usage, free. Ability to call landlines and cellphones at a fixed charge, fee.
*8. Pricing To Fulfill Your Customers' Needs. There's nothing inherently wrong with the other pricing strategies, but you need this one to succeed in today's competitive retail world. Customers say it's worth the extra attention and lack of worry about hassles, returns, exchanges, and non-pareil customer service. The most successful strategy is service.
Bottom Line For Your Bottom Line:
So what will distinguish one retailer from another if pricing is similar? What pricing is the best for you? The answer: It's about the service and the price combined. The retailer that offers the most attention, the best, easiest service -- from product information and support to ease and timeliness of ordering, delivery, exchange, and other amenities will be the winner.
The Secret: Retailers need to ask the right price to the right customers at the right time. For this retailers need to use the technology of pricing and assortment intelligence solutions, and the wisdom of how to use the analytics for the greatest advantage.