How to price your products in light of economic fluctuations
Thinking of introducing your own product to the market ? Own a company and want to launch a new product ? Or having trouble with your production returns? If you are one of them, you need to know how to price your products in light of economic fluctuations, in order to reap good financial returns.
Product pricing plays an important role in determining the financial return of the company or the business owner, regardless of whether these actions are large or small, especially in light of the fluctuations currently facing the whole world at the economic level, if a price is greater or less than the appropriate level this will cause a big problem For business owners.
But before we talk about the most appropriate way to price products, we first have to understand the meaning of product pricing and what is meant by the concept of pricing strategy.
When a company offers products to the market, it sets a price for selling it, and this is known as the pricing process. As for the pricing strategy, it can be briefly defined as the ways and means that small and large companies depend on in determining the prices of their goods and products.
Factors to consider when pricing products
No company, big or small, can determine the prices of its products randomly. No product or commodity is priced based on the cost paid in its production only, but more thinking and calculations are required.
The amount that the customer wants to pay for the product has little to do with the cost and has to do with how much he appreciates the product or service they buy,” says Eric Dolansky – an associate professor of marketing at Brock. (University of St. Catharines, Ontario).
Dolanski has developed a pricing technology that he believes all entrepreneurs should follow and adhere to, and states that pricing the value of a product depends on the customer’s own estimation and cost at the same time while calculating the return on profit.
From here we can say that there are a number of factors that are taken into account during the pricing process, namely:
Cost of distribution.
The physical level of the target segment.
Economic market situation.
Trade payment margins.
The importance of pricing products according to economic conditions
Any organization or company seeks to increase its profits in any way, and now society as a whole suffers from volatile economic conditions, which is clearly reflected in the sales market and consequently on profits, and here the importance of product pricing appears in accordance with economic conditions.
You cannot put high prices for products in light of the economic recession, nor can you put products at a cheap price in the event of a boom in the sales market.
The importance of setting appropriate pricing for the product or commodity is that it is one of the most important means of marketing and promoting the products. The more the price of the commodity is appropriate to the conditions of customers, the more popular they are.
You understand that the more you place a good price, the more profit you can make, once your products are put on the market.
In order to take advantage of the good pricing features you need to adopt one or more of the following pricing strategies and apply them correctly.
The most important product pricing strategies
If you are a small business owner and really want to know the best methods of pricing products in light of economic fluctuations, there are a set of strategies that are considered optimal for pricing, and they are:
Pricing strategy to penetrate the market:
Setting the right pricing for the goods or product can be your way to prove yourself in the market if you are a beginner, and this is through your reliance on penetration strategy, which aims primarily to attract customers by offering few items in the price compared to competing goods.
Although adopting a penetration strategy increases the spread of your commodities in the market and reaching the target audience faster and is certain that it is full of risk; the loss can actually be avoided at first, but what you achieve from profits after a while due to the spread of your commodity and the public’s awareness of it can help you Easily avoid that loss and ensure your position among competitors.
Economy pricing strategy:
This strategy depends on reducing costs in production and even marketing as widely as possible, which is a method followed by many companies, whether distributors, large traders and even retailers.
The low cost of production here enables the company to offer products at a lower price without facing any loss and profits, although a little bit.
It should be borne in mind that this strategy is suitable for large companies, not small or start-up companies that basically have little sales and cannot risk getting a little profit.
Competitive pricing strategy:
This strategy is also known as a competitive pricing strategy, and it mainly depends on the prices of the same commodity in the market, regardless of the costs expenditures or even the size of customers demand.
The primary criterion here for setting a price for a product is the competitors ’prices. When the same commodity is available in the market with a convergence of quality, customers tend to the goods that are less in price, which many companies exploit to reach and attract the target audience.
Dynamic pricing strategy:
It is also defined as a demand strategy, or a time-based price-setting strategy.
This strategy is distinguished by flexibility. Prices here change according to the customers ’demand for the same commodity. We can clearly observe it in hotels, airlines, halls, and events and celebrations places. All of them set the price according to the season and increase the demand.
Promotional pricing strategy:
This strategy is based on offering discounts or gifts on the product in order to attract customers to it, for example we see some stores that give customers vouchers when they reach a certain level of payments.
Some adopt this strategy, especially in the period of discounts. We find offers, for example, buying one and the other as a gift or buying the product at half the price in certain periods. Often, this strategy is followed at the time of the depression or in the seasonal times when other places are also offered similar offers.
Psychological pricing strategy:
Instead of addressing the mind of the target customers, this strategy addresses their psychological state and emotions; it is known that the price or the material cost is the first thing that attracts the attention of customers, in the event that we offer a piece of clothing at a price of 500 pounds with high quality and offer the same form with a lower quality at a price of 300 pounds, we will find customers rushing On the lowest price segment while neglecting the quality difference.
The customer’s affection here led him to look at the lower price and made him think that his profit in reducing the price and did not realize the importance of quality.
Post selection pricing strategy
Once you determine the appropriate pricing strategy for you, your financial situation and the nature of your product, you can increase your profit margin gradually, but you will need some assistance methods such as a reliable accounting program, and a data monitoring base so that you can evaluate the pricing strategy that you have adopted and help you change prices At the right time thus increasing your profit and staying on the market.