When it comes to business sales, pricing strategies play a key role in helping agencies win more clients. So how do you choose the best strategy to win the deal? Read on to learn more.
What Is Pricing Strategy, and Why Is it Important?
Pricing strategy refers to the ways that businesses set prices for their products or services. This term can cover everything from market conditions, actions taken by competitors, input costs, and more. Different strategies are more useful for certain reasons or certain situations, so choosing the right strategy can vary from business to business.
Proven Pricing Strategies
When choosing the best pricing strategy to win clients, you need to be careful in how you select it and base your decision on solid market research. Here are five proven and effective strategies that our partner and client agencies are using to increase their sales:
1. Value-Based Pricing
Setting your pricing based on how much value the clients think your agency’s services and products are worth is known as value-based pricing. When dealing with high competition levels, this strategy can be very good to use. If your agency partners with companies that have high reviews, customer loyalty, and satisfaction rates, this can make your perceived value rise, making this a good strategy. To best employ this strategy, though, you need to have completed extensive market research and have a well-developed understanding of your competition.
2. Competitive Pricing
When dealing with a lot of competitors, you can use this pricing strategy to sell your products or services at a better price or with better payment terms. This can be a good way to get yourself into a market that has many competitors, but less effective if dealing with long-term goals as your competitors may catch on to your techniques and start using similar or more appealing tactics.
3. Price Skimming
Price skimming is where you start with a high price and then decrease the price over time. This is a strategy best used for new products and services that do not have many competitors. As competitors enter the market, you then lower your price, making your product all the more attractive to potential clients. Be aware that this is not a good strategy to employ if competitors are creating similar products and already have them on the market.
4. Price Anchoring
This type of pricing strategy is similar to competitive pricing, in which you start with a higher price point that becomes the basis of the buyer’s decision. It can be done in two ways: first, by showing how much your competitors charge and offering a lower price for similar goods and services. Alternatively, you can use your own price points to control the anchoring.
A good example of price anchoring is how Steve Jobs first introduced the iPad: first, he talked about how it was worth $999 and eventually revealed the actual price of $499. By starting with the higher number, Jobs made the iPad seem like a steal.
5. Psychological Pricing
The most common pricing strategy, yet effective for many types of business. Psychological pricing encourages clients to respond based on emotions rather than logic. It is often done by using the magic “99” at the end of every price point, for example, $999 instead of $1,000. Buyers are more likely to perceive the value as $900 instead of $1,000, therefore making it a better and more affordable deal.
By increasing the perceived value of the product or service, you can use this strategy to sell more. If you’re looking for a simplified decision-making process for your clients, this is the strategy to use. Be careful, though, not to come off as manipulative with this strategy, or you risk losing the sale.
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