Whether you work in hospitality, retail, or financial services, if you want to run a successful and profitable business, you need to make sure you create the right pricing strategy.
According to most business schools, pricing should be one of the four key components of any marketing campaign alongside product, place, and promotion. That being said, out of all of these four concepts, pricing is often the one that business owners struggle with the most.
If this is the case for you and your business, then you have come to the right place. Below you will find out how to develop a winning pricing strategy that will transform your business goals into a tangible reality.
Ready to get started?
Identify your short and long term goals
If you want to create a good pricing strategy, you first need to determine your business goals. These may include:
- To increase YOY profits
- To improve immediate cashflow
- To increase revenue per customer
- To introduce a new product or service
- To outperform the competition
- To gain a larger market share
As you can see, some of these goals are intended for the short term and others are more suited to long-term planning. That being said, each type is equally as important as the other when it comes to developing a winning pricing strategy.
Research your market
If you want to be competitive, you need to make sure you conduct a thorough market pricing analysis. Of course, you will almost always find options that are cheaper than your own but that does not mean that your current pricing is wrong. There is room in the market for lots of different pricing structures and varying quality of products.
That being said, if you are offering a similar product or service but at a much higher price, you may need to look at ways of bringing down your operational costs so that you can remain competitive.
Collect and use data
Collecting and utilizing data is a pivotal step in developing a winning pricing strategy for your business. In today’s data-driven landscape, having access to market research, competitor pricing, and customer feedback is invaluable. This information can help you make informed decisions about setting your prices.
Furthermore, using technology that enables you to track and use data specific to your business niche can be even better. Say you’re in the appliance retail industry or a somewhat similar business. In that case, tools and platforms like the Appliance Website Builder and others can provide you with the ability to gain valuable insights into customer behavior and preferences, how they move about your site and what they like and don’t like. Similarly, if you happen to be in the hospitality business or are thinking about opening a hotel then, established Hotel Website Builder services can help you create a user-friendly and functional site to establish and expand your business. This aids in the development of pricing strategies that align with your target audience’s expectations. Continuously monitoring and analyzing data can allow you to adapt your pricing strategy to changing market conditions, ensuring that your business remains competitive and profitable in the long run.
Offer consistency
There is no point setting a very low pricing structure if it is not maintainable. This will only frustrate and alienate both existing customers and potential new ones. Therefore, you need to make sure that your pricing strategy is able to offer consistency.
One effective way to do this is by using pricing software such as the Hotel Channel Manager, which is designed to help hotels and resorts maintain consistent pricing across all channels, as well as to facilitate online bookings. This tool also allows you to easily change your pricing depending on the season.
You can find pricing software for businesses in many other industries by conducting a simple online search.
Track your success
Although you want to make sure you offer consistent pricing as mentioned above, there is no point in “flogging a dead horse” so to speak. Therefore, you need to make sure you are measuring the success of your pricing strategy with your operating margin, i.e. profits/revenues.
Warning signs to look out for that your current pricing strategy is not working include:
- You are winning every order. This is a sign your prices are too low.
- Your competitors are charging more for inferior products. Another sign your prices are too low (although it could be that theirs are too high).
- Your cashflow situation is poor.
- Discount codes are driving your sales. This could indicate your original prices are too high.
There you have it. A simple and straightforward guide to creating a winning pricing strategy for your business. Good luck getting started with yours!
