Price sensitivity
Price remains an important element in the marketing mix. Companies often start by determining the price and let other marketing decisions depend on it.
Pricing depends on the one hand on the costs of the creating the product/service, how is it distributed e.g. locally, nationally, internationally. When determining the price, consideration must be given to the target group. What can this afford?
Another strategy is concentrate on the added value that your product/service offers your target group. Be aware, there will always be competition at price level, through low-cost providers but you revert back to your Unique Selling Point, Competitive Advantage – your Purple Cow. If you succeed in creating added value, then the consumer will pay. If that added value is in the brand name, it is a valuable capital. According to Philip Kotler, superior brands can demand more, but not as much more than before.
The price sensitivity of the consumer
It is ultimately the consumer who decides whether he or she thinks your product/services worth their investment in it .. Some product/services are less price sensitive – the demand is less elastic than others. On the one hand, this applies to prestigious, high-quality product/services for which there are few alternatives – think of VIP Mastermind Coaching Groups as an example. People are less price sensitive to the price if they want the product.
New product
Two strategies for pricing new products:
The exclusive time dependent price strategy: if you have an innovative product you start as an exclusive product and sit high with the price. As the product gradually becomes less exclusive over the years, the price will fall.
The penetration price strategy: Imagine that you want to conquer a market quickly, that is, quickly gain a large market share. Then a lower price must be chosen.
Pricing methods
Costing your product of service is a vital decision of your business. simple method for determining the price is the cost-plus method. This involves estimating your costs and adding a profit margin. Another cost-based method is break-even pricing. The company estimates the price at which it achieves a certain desired return.
The third approach to set a price is to start with the consumer. What value do they attach to your product/service? How much is he willing to pay for product/service X
Another approach to pricing is to take the current price from the market leader (s). If you come as a small new player to a market in which there is little difference in the product/service, then this is probably not a bad strategy.