10 product strategies for your product
Is price strategy the result of a rational decision? Sometimes it arises from impulses or market pressure. Recognizing our current price policy and choosing which one’s better for our business strategy is essential for our company’s success. What’s yours?
1. Launch price
Consists on settng a low price when launching the product to gain market share. Once this objective is acomplished the price is increased. The intention is to take advantage of impulsive buying caused by the offer to introduce the product. However, this can “anchor” the product value at the offer price which results harmful for the brand’s price development.
2. Price reduction (price differential)
An initial high price is set to later reduce it so as to make the product available to a greater number of buyers.
Companies with programmed obsolescence, like Apple, use this strtegy. New products are launched with a high price while the obsolete keep dropping value overtime. This way you project a high product value while you access a wide client base.
3. Competitive price
The price is set by reference to price competition. A price higher than our competitors seeks to create brand image value while a lower price seeks to capture greater market share.
4. Price per product line
Different prices are set for similar products with different characteristics to “open” the spectrum. This means aproaching te greatest number of possible consumers maximizing product margin.
5. Price per product pack or volume discount
The strategy is met in offers like “pay two, get three” and consists on offering a discount when adquiring a certain amount of products. The objective of this tecnique is to promove a greater selling volume while slightly sacrificing margin withut harming the anchoring of our product’s price.
6. Psychological price
Can a penny discount make us buy more? This is the question that sometimes we ask ourselves when we find a product worth 99.99 euros instead of 100. Well, it works. That penny helps us put the price just below a psychological barrier. Sometimes, that’s the little push a customer needs to make a purchase decision.
7. Premium price
All luxury companies or simply companies whose product seeks to convey a certain status resort to this strategy. Choosing a high price for our product has the immediate consequence that only a small number of consumers will buy it. For such consumers, the product is more attractive precisely because only them and a few others can purchase it.
8. Optional Price (extras)
If you’ve ever purchased a vehicle, you will probably have offered all sorts of extras and that is precisely this strategy. Usually, the extras have better margin than the main product and by selling the company manages to improve its profits. Optional price strategy is the pricing that low cost airlines used to revolutionize the market.
9. Price on cost
In this case, we obtain the price by calculating what it costs us to offer the product and adding the percentage of profit that we get.
The price is closely linked to tangible product value and brand positioning plays a minor role. It is mainly used for products whose cost fluctuates and forces dynamic price setting, for example, gasoline.
10. Captive prices
Nespresso and also printer-selling companies are great followers of this strategy. In this case, a premium price for the necessary accessories is set to use a product (the capsule for the coffee machine or printer ink).
Sometimes, the company sacrifices the margin on the price of the input product (eg printer) to retrieve later by selling accessories.