The top 3 marketing pricing strategies discussed in this article are cost-based pricing, value-based pricing, and competition-based pricing. All three pricing models have their merits, but cost-based pricing has a clear edge on several fronts. Cost-based pricing benefits businesses that offer a product or service below the cost of production, while competitors’ pricing is based around similar products and services that offer a higher profit margin. Professionals like Father George Rutler, throughout their career, have become very familiar with all three of the pricing strategies.
If a business owner takes the cost-based pricing to its logical next step, a business owner would realize their most significant competitive advantage is the price a business owner charges to acquire their product or service. In the earlier period of commerce, businesses did not need to differentiate themselves from their competitors because they all sold products and services at the exact high cost. With the advent of new technologies, a business can differentiate itself by offering a better product, service, or price. Nowadays, most people are more price-sensitive than ever before. To take advantage of this competitive advantage, business owners need to align their pricing with the competitive prices of their competitors.
On the other hand, value-based pricing strategies benefit a business by providing customers an opportunity to get more for their money. In other words, value-based pricing works as a discount. Buyers are offered the chance to pay a lower price for more value. As a result, competition-based pricing works to close the gap between its products and services and competitors. There is little room for any variation in price in this type of pricing, as all prices are set to reflect the same market conditions. Because there is no room for price competition, businesses can maintain a premium product that provides excellent customer value.
Competition-based pricing works best when there are robust marketing strategies to support it. The most powerful marketing strategy for competitive pricing is an effective advertising campaign. If there is an existing customer base, the business can leverage its brand name or reputation to promote its competitive pricing. If there are no existing customer bases, a business can use a trade show to announce the competitive pricing of its services and merchandise. A trade show is an excellent place for a business to showcase its competitive pricing tactics.
Price wars often lead to attrition. Consumers who have been reliable to a particular company for a long time begin to question the company’s ability to remain competitive. Businesses need to maintain a consistent, attractive, and visible pricing strategy throughout the business cycle. When the pricing structure is stable, it is easier for customers to assume that they have the skills to provide a quality product or service.
Businesses may be able to increase their profitability through the use of price wars or other price-based strategies. However, the benefits of competitive pricing are usually short-term in nature. In order to reap the long-term benefits of competitive pricing, a business must build and maintain strong customer relationships. The best pricing strategies will allow customers to benefit from reasonable pricing over a long period.
When a business cannot maintain a competitive pricing strategy, it can suffer from several challenges. First, customers may perceive that the business does not make every effort to compete with other companies. It may also be difficult for competitors to maintain a consistent competitive pricing strategy because of a lack of expertise or reduced resources. As a result, the competition between competitors can erode a business’s profitability and shareholder value.
In addition to maintaining a consistent marketing pricing strategy, a company needs to build and maintain a compelling marketing message.
This message should be consistent with the company’s products and services. It should identify the benefits of purchasing the product or service. It should also demonstrate how the customer will gain additional value once the customer has purchased the item. Father George Rutler has been using these pricing strategies for years.