Xpansion Code Radio

Pricing Strategies

Episode Summary

How pricing strategies work and which one is best for your business.

Episode Notes

Value-based pricing

• With value-based pricing, you set your prices according to what consumers think your product is worth. This is a great pricing strategy for Software as a Service businesses or SaaS

Competitive pricing

• When you use a competitive pricing strategy, you're setting your prices based on what the competition is charging. This can be a good strategy in the right circumstances, such as a business just starting out, but it doesn't leave a lot of room for growth.

Price skimming 

• If you set your prices as high as the market will possibly tolerate and then lower them over time, you'll be using the price skimming strategy. The goal is to skim the top off the market and the lower prices to reach everyone else. With the right product it can work, but you should be very cautious using it.

Cost-plus pricing 

• This is one of the simplest pricing strategies. You just take the product production cost and add a certain percentage to it. While simple, it is less than ideal for anything but physical products.

Penetration pricing

• In highly competitive markets, it can be hard for new companies to get a foothold. One way some companies attempt to push new products is by offering prices that are much lower than the competition. This is penetration pricing. While it may get you customers and decent sales volume, you'll need a lot of them, and you'll need them to be very loyal to stick around when the price increases in the future.

Premium pricing

• Premium pricing is for business that create high quality products and market them to high-income individuals. The key with this pricing strategy is developing a product that is high quality and that customers will consider to be high value. You’ll likely need to develop a “luxury” or “lifestyle” branding strategy to appeal to the right type of consumer.

Premium pricing

• Premium pricing is for business that create high quality products and market them to high-income individuals. The key with this pricing strategy is developing a product that is high quality and that customers will consider to be high value. You’ll likely need to develop a “luxury” or “lifestyle” branding strategy to appeal to the right type of consumer.

Economy pricing 

• This strategy is popular in the commodity goods sector. The goal is to price a product cheaper than the competition and make the money back with increased volume. While it's a good method to get people to buy your generic soda, it's not a great fit for SaaS and subscription businesses.

Dynamic pricing 

• In some industries, you can get away with constantly changing your prices to match the current demand for the item. This doesn't work well for subscription and SaaS business, because customers expect consistent monthly or yearly expenses.

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