Which pricing strategies are available?
Fairhaeltnis is giving an overview about the 3 most important pricing strategies. You can read a lot in common marketing books. Here you find something simplified to learn which ways to use defining your price.
Cost – plus – method
The cost-plus-method is somehow self-explaining and one of the most often used technics. It is cost oriented and you are adding a defined % for your margin. Based on a solid cost calculation including your risks you can achieve a good result for your company.
Good calculation means no surprises that will eaten up your margin.
Especially hidden costs and risks you need to identify beforehand to minimize the financial risk to your results.
AND: using this method many companies do not use the full potential achieving higher prices that would have positive effect on company results.
Competition based pricing
What is the price competitors use for the same type of product? This knowledge is the foundation of a completion based pricing strategy. Therefor you choose similar products in the market and compare the price of your competitors. Check carefully if they are really similar products or if there are differences. Than you can define your price.
BUT: the price send a message to your customers. It is important that your price reflects your positioning. Beside the product itself, quality, service and availability should be included.
Value based pricing
This strategy is also known as added-value-strategy. To focus on provided value to define the right price level. In forums and blogs is one of the hottest topics in the pricing world.
The advantage: the customer will get a price that reflects the customer value. You can show the value as an amount of money that you split with your customer. It will make your negotiation much easier and more transparent.
The disadvantage: the preparation time needed is the highest comparing all 3 strategies of this overview.