TL;DR
- Knowing your competitors and customer buying habits is crucial for effective pricing decisions that resonate with your market.
- Leverage historical data and dynamic pricing to stay competitive and responsive to market and consumer trends.
- Assess your brand's value in the eyes of consumers to ensure your pricing strategy aligns with their expectations and willingness to pay.
- Dynamic pricing strategies should be aligned with market fluctuations to avoid profit loss or overcharging.
- Consistently reevaluate your pricing strategy to reflect market values, customer feedback, and changes in the competitive landscape.
- Offer personalized discounts strategically to build customer loyalty without sacrificing your bottom line.
- Make data-driven pricing decisions that consider production costs and required time, keeping your pricing flexible to adapt to market shifts.
- Utilize tools like Togai to implement bespoke pricing strategies efficiently, enhancing your ability to respond to market demands quickly.
Why Pricing Decisions Matter
“Pricing is the only element in the marketing mix that produces revenue; other elements produce costs.” Phillip Kotler
Pricing is a powerful tool. Fixing a price that makes revenue AND makes sense to your customers is a tricky, time-consuming process involving many aspects.
A study reveals that 87% of shoppers care about getting a good deal for their money when choosing brands or stores.
Pricing matters to everyone. Hence, putting a lot of thought into your pricing decisions is crucial. Data-based pricing decisions hold immense value to those taken in an impulsive hurry. Well-founded pricing decisions help you:
- Grow your business
- Sell your product or service
- Create a strong brand value
- Bring profitable revenue
- Build long-lasting customer relationships
When it comes to pricing strategy, especially for small businesses, you need to consider many factors to maximize profits. Leveraging data to make pricing decisions based on competition, market value, and other factors.
What Are Pricing Decisions & Why Are They Important?
We live in a digital era where information is within everyone’s reach. It is one of the primary reasons that calls for data-driven pricing decisions. Back in the good old brick-and-mortar days, consumers had limited market knowledge, limited sources of knowledge, and mobility. Manufacturers and sellers had more flexibility and freedom in making pricing decisions.
However, things have changed in this digital era. Sellers must handle pricing with finesse to balance covering business expenses and optimizing what customers will pay for the offerings. Price your offerings too low, and you may incur irreparable losses. Price it too high, and your customers will compare it with your competitors and the market value. They may choose a subscription that they feel is right for their budget.
As a business owner, you'll need to continually reevaluate your pricing strategy as your subscription offerings evolve. The adjusted pricing should reflect the changing market values, customer feedback, economic trends, and changes in the competitive landscape.
Let’s now assess the important criteria to consider when making pricing decisions.
Also Read: The Ultimate Guide to Pricing Models with Examples & Types
6 Things You Must Do When Making Pricing Decisions
1. Understand your competitors.
Every pricing decision should be based on your market competitors. There are several ways to monitor your competitor’s pricing:
- Use competitive research tools to track the keywords you are competing against. This helps you identify and monitor competitors.
- Google your target keywords manually by leveraging social media platforms, online marketplaces, sales and marketing channels. It helps in making effective decisions and analyzing ROI in a better way.
- Rely on automated tools or manual analysis to track the latest price changes in the competitive landscape.
Such efforts will bolster your efforts in making effective pricing decisions.
2. Unearth insights with historical data.
Consistent tracking of competitors’ pricing results in abundant data you can later use to study consumer behavioral patterns. For example, you can identify specific times of the year with your competitors to implement a price increase or the time gap between two discount campaigns. You can also identify profitable products and strategies to improve the profit by modifying your prices. With such insights, you can develop effective and sustainable counter-strategies by understanding brands where you have a competitive edge.
3. Know your customer’s buying habits.
A Deloitte study reveals that customers are changing in more ways than you think. The price remains the ultimate factor, although new consumers identify brands with shared values. These factors heavily influence their buying patterns. All it takes is one click for customers to look up prices and feature comparison sites strewn all over the internet. Customers can compare a product’s price and market value regardless of where they are. So, ensure your pricing is fair and highlights how your product differs from your competitors.
4. Understand how much your customers value your brand.
The higher your brand value, the better chances of your pricing being accepted by your customers. The concept is simple: Customers will not pay for a service that’s not worth their money. To gain valuable insights into customers’ perceptions of your brand, it is best to ask them straight away rather than resorting to assumptions. It will help you understand what features you can add to make your subscription more appealing and valuable.
5. Dispatch personalized discount codes to customers.
Conducting a WTP or willingness-to-pay analysis is an effective way to shortlist price-sensitive customers worth your effort. You can step up your efforts by offering affordable discounts to these coveted customers- but only if the discounts don’t cripple your profits. You can also garner the support of recurrent website visitors by sending them personalized deals and encouraging them to subscribe to your offerings. These are good tactics for increasing your customer base and safeguarding your profit margins.
6. Create and implement dynamic pricing rules.
Dynamic pricing is the strategy of using algorithms to modify your prices according to market conditions. If the market circumstances are conducive, you can increase your pricing or bring them down if they are not. You must stay in tandem with the market fluctuations to avoid losing profits or charging exorbitantly.
Make Smarter Pricing Decisions With Togai
When it comes to pricing decisions, always follow this golden rule: Make your pricing appealing to customers. Modern consumers are price-sensitive, and online pricing is becoming more transparent. Hence, relying on run-down cost-based prices and baseless assumptions could be a big mistake. Instead, base your pricing decisions for your product and services on these two data points:
- What it costs to make the product
- How much time it takes to do the job
Also, consistency is key to understanding market price fluctuations, so your pricing doesn’t stick out like a sore thumb. Leverage the data to create flexible price points adaptable to changing market conditions.
Want to implement bespoke pricing strategies 10x faster? Togai is here to assist you. Schedule a demo today!
