Setting an appropriate pricing model can change the way you do business, but it has to fit the needs of your company and the needs of your consumers. In this article, we want to introduce you to the four most common pricing models and invite you to have a conversation with Julie Keyes about choosing the one that is appropriate for you.
Economy Pricing Model
If you’re selling a generic product or a bulk sale product, economy pricing is likely the most appropriate for your business. This requires your company to limit the cost spent on marketing and reinvest in giving your customers the biggest savings that you can. Be warned that this model only works with big businesses. It can be detrimental to small businesses, where it’s already difficult to get your name out to buyers.
Market Penetration Pricing Model
When you first break into the market, you’ll likely use a market penetration model. This allows you to attract customers by offering introductory prices on products to bring new buyers to your company. This will result in an initial loss of profits, but can also draw attention away from your market competitors. Once you’ve established yourself as a company of value, you’ll have the opportunity to increase prices.
Premium Pricing Model
If you sell unique or artisan products, you can market a value of the product that allows you to price at a premium. This requires shifting the public’s perception about your product, which will allow you to charge more for it. This model requires that you make a strong effort to market, display, and produce the goods in a way that justifies the pricing.
Price Skimming Model
The price skimming model allows you to offer higher prices when new products or services are brought into the market. When competitor goods begin to appear, your company lowers prices in order to remain competitive. This allows companies to get huge profits in the initial phases of sales, which can mitigate the losses once competing products are introduced.