By approaching the issue of pricing strategies/major pricing strategies with a value-oriented. It aims to guide effective eCommerce pricing strategies in the business world.
Pricing Strategies Training
A strategic approach to decision-making and implementation processes at the stages of determining, arranging, and changing tactical campaigns with the offered product or service price will be emphasized. Basic pricing strategies will be enlightened by considering pricing as a medium-long-term and strategic process and giving the products or services the value they deserve.
Pricing Strategies Training Content
- Why is the price so important?
- Unchanging Principles of Pricing in a Changing World
- Factors Affecting Price Decision and Strategy
- Pricing Process
- Price Elasticity
- Price Setting Strategies
- Price Adjustment Strategies
- New Trends in Pricing
* The training will be held in a live virtual classroom.
* The Certificate of Participation, which will be given after the training, will be shared with the participants in digital media.
How Should the Pricing Strategy Be?
The pricing decision is the most important and critical marketing decision.
However, profitability is not the only variable to be considered in pricing. Profitability is the absolute and final result. However, as marketers, we try to look from a broader perspective when setting prices.
First of all, I would like to remind you that there are two main constraints when determining the price. In other words, if a price above the upper limit is determined, no demand will occur, and if it remains below the lower limit, no profit can be obtained. After all, they both get to the same point: operational loss.
Therefore, the price should be somewhere between these two levels. The higher the price is than the cost of production, the higher the profit to be earned. Two variables determine where the price will be between the lower and upper limit: Your marketing activities and your competitors’ position in the market.
If you have strong competitors in the market, the price will be pressured downwards. If your position is strong and you are doing successful marketing management, the price will increase to the upper limit. The whole of this process already constitutes the marketing struggle.
But pricing does not only serve the purpose of profitability. The main business objectives that can be realized in addition to pricing and profitability are as follows.
- Short term profit maximization
- Balancing the market
- Creating a positive image
- Price leadership
- Creating loyalty in sales channels
- To create interest in the product
- Using the price of the product to increase the price of other products in the same line
- Increasing sales volume to create economies of scale
As you can see, pricing does not only serve the target of profitability.
Profitability and marketing goals in pricing sometimes conflict with each other. The way to get rid of this contradiction is to position your product or brand correctly in the market and to manage the 4 P’s correctly. It is not easy, but it is possible.
DON’T THINK IF I HAVE MONEY I WOULD INVEST IT HERE!
SEE WHAT YOU CAN DO WITH 100.000 TL VIRTUAL MONEY!
If you want to increase your sales and profitability, you have 2 options: either reach more customers or make more sales to one customer. But did you know that you can increase your sales simply by changing your prices or the way you present prices? This is a very simple method, but extremely effective on your sales.
Here are price determination methods that have been proven to increase sales for you:
1.Similar pricing may cost your sales
According to a study by Yale University, selling two similar products with a very small price difference instead of selling them at the same price increases the purchasing tendency of the customers.
In an experiment, customers are offered the option of purchasing a pack of chewing gum or not spending their money. In the first case, a sales price of 63 cents is determined for two different chewing gum brands. In this case, only 46% of customers prefer to buy. In the second case, the percentage of customers who prefer to buy chewing gum when sold at different prices, one for 63 cents and the other for 64 cents, exceeds 77%. This is quite a high rate compared to the first experimental group.
What is meant here is not that you have to set different prices for your identical products. You just need to understand why the customer didn’t make a purchase decision: When similar products are sold at the same price, customers choose to delay their purchasing decision rather than buying.
There is an old saying: The best way to sell a 2 thousand lira watch is to sell it next to a 10 thousand lira watch. So why? At this point, the main factor is “anchoring”, which is a very common cognitive bias among people. This term basically refers to our tendency to rely heavily on the initial knowledge we have in the decision-making process.
In a study conducted to evaluate the effects of anchoring, researchers asked subjects to estimate the value of a house offered to them. At the same time, booklets containing information about the surrounding houses were given to the subjects. Some of these booklets contained information about houses with very reasonable prices, while others contained information about houses with unusually high prices. Two separate groups of university students and specially selected real estate market experts were both shocked when they glanced at the booklets with high-priced houses. The factor of fixing information in their minds was powerful enough to influence even experts.
Placing “premium” ones next to standard products or services can create a very clear perception of value in your potential customer’s minds. Because most likely, they will use cheaper product options as a reference when comparing products with each other.
Be sure to read: What is the Anchoring Effect? How Does It Affect Our Decisions?
According to the rule known as Weber’s Rule, the distinct difference between the two stimuli is directly proportional to the intensity of the stimuli. In other words, a change on something depends on how big that thing was before. Weber’s Rule is also frequently adapted to the field of marketing, especially when it comes to price increases in products and services. When it comes to a price increase, of course, it is not possible to specify a miraculous number or rate, but Weber’s Rule shows that an increase of approximately 10% is the upper limit that affects the purchasing decision of the customers. As always, many variables also have an effect on pricing. Therefore, it would be more appropriate to accept the Weber Rule as a test threshold rather than as a definite rule.
Lowering the pain threshold
According to neuroeconomics experts, the human brain supports the act of purchasing until the “pain” of shopping. The limit is reached when the perceived pain outweighs the perceived gain. A study conducted at Carnegie Mellon University revealed that there are many ways to lower this pain threshold and, in return, to prevent customer losses by increasing customer satisfaction after shopping.
Here are some of these methods:
Redefining the product value (Installment): Although the total amount of money out of pocket is the same, it is thought that the monthly subscription fee of 84 TL is more profitable than the annual subscription fee of 1000 TL.
Group purchased products together: Luxury car sales are a good example of successful product groupings, according to Professor George Lowenstein. Instead of purchasing self-heating leather car seats, navigation systems, in-car virtual assistants separately, it is a much more convenient option for customers to buy them together as a package.
Focusing on the beneficial properties of the products or the satisfaction arising from the use: Marketing messages that emphasize the useful features of the products, such as “The massage feature on the back of the chair is perfect for your back pain”, is much more effective in attracting the attention of traditional customers. Customers with a more liberal point of view focus more on messages such as “This back massage feature will help you relax”, expressing their satisfaction after using the products.
Either free or not: the word “free” is a very powerful word, as described in Dan Ariely’s book “Predictably Irrational”. In one example given in the book on this topic, Amazon’s sales in France were much lower than in other European countries. The main problem here was that the shipping fee in France was 20 cents, while the delivery of the products was not charged in other places. While successfully running pricing is to get the highest possible return on products, some things that initially seem unimportant can lead to devastating resistances in your customers in the long run.
Take advantage of the word “low”: According to another study, it was found that TV subscription rates increased by 20% when the phrase “for only $ 5” instead of “for $ 5” in messages sent to customers. This sometimes shows that successful pricing strategies are hidden in the statement details.
5.Stand Time-Resisting Traditional Approaches
Prices ending with the number 9 are one of the oldest pricing methods described in the literature. So does this method really work? The answer to this question is a resounding YES, according to a study published in the magazine “Quantitative Marketing and Economics.” Because, as a result of the research, it has been revealed that when the products are put on the market with prices ending with 9, they sell much more than they have lower prices.
In this study, the sales of two women’s clothes with a sales price of $ 35 and $ 39 were compared and it was seen that the clothes with a price of $ 39 were sold 24% more than the others.
While the normal price of the product is $ 60, it is currently only $ 45, and the effect of the discounted sales prices offered to customers is, of course, greater than the prices ending in 9, but when the two are applied together, it is possible to achieve a higher sales volume compared to products sold at lower prices.
For example, let’s say the following two options are given to customers:
- While the normal price of the product is 60 dollars, it is currently only 45 dollars!
- While the normal price of the product is 60 dollars, it is currently only 49 dollars!
Even if the discounted sale price ending in 9 is actually a higher price, it will generate much more sales than the ending 5. For this reason, even though it is a very old market move, prices of 9 are still a pricing method that can have positive effects on sales.
6.Money Saved Against Time Spent
Why a company like Miller Lite, where many of the drinks they offer to the market are at low prices, used “Time for Miller!” As their advertising slogan. using the expression? Shouldn’t they stress that their price is low? According to Jennifer Aaker, a Stanford University academic, customers tend to remember their happy memories more when they are reminded of the time they spend with this product, rather than the money saved on the product, in many product categories.
“Because the experience of any person with a product strengthens the personal bonds that person establishes with the product. For this reason, emphasizing the time spent with the product creates more positive feelings in the customers and thus, much more sales potential is created. says, Aaker. In an article published by the Wharton School of Business, Aaker also says that many purchasing activities tend to fall into either the “experiential” or “monetary” category. In this context, while things like concert tickets make use of discourses that focus on the time spent, sales of products such as tailored trousers are mostly fed by money and prestige concepts.
When not done correctly, lower pricing of products compared to others can also result in uncompensated low sales. According to a study conducted by Stanford University, a comparative pricing strategy can have unexpected consequences if there is no valid market environment for comparing products. Asking customers to compare the prices of your products with those of your competitors can undermine their trust in you. The following sentences written in the research report are very supportive of this situation:
“The fact that we asked customers to make comparisons between products created the perception that they were deceived in some way.”
The first years of the insurance company named Esurance can be shown as one of the most classic examples of the correct price comparison method. The company gave the message to its customers that standard insurance is not always the best solution. They built their rhetoric on how they reduced their wages in the most accurate way, and emphasized in these statements that they moved their way of doing business to online platforms completely and eliminated unnecessary costs. Because the main thing is not to repeat that your prices are cheap, but to explain why they are cheap.
8.The Power of Content
How much you spend on any product is directly related to where you buy that product. Economist Richard Thaler conducted a test on this issue years ago and showed that customers were willing to pay much more when they were told that a beverage brand was sourced from an A-class hotel rather than a third-rate grocery store. Thaler emphasizes that the main reason for this is content: The main reason behind the tendency of these people to pay higher prices was nothing but the perception of prestige created by the concept of a class A hotel in the customer’s mind.
The perception is critical in evaluating whether a product price is reasonable or not. For this reason, it will be very useful to create a convincing marketing story for the product. However, despite its importance, today this requirement is forgotten by many company owners who neglect to position their products. In fact, we witness many companies fail because they, unfortunately, lose control over their gaudy marketing phrases.
9.Different Pricing Levels
Many of us are ignorant of the concept of “value”, says Professor William Poundstone, author of “Priceless: The Myth of Fair Value”. As such, it is possible for us to be manipulated in many different ways. In his book, Poundstone tries to understand the buying behavior developed by customers against a range of different brands of beverages. In its first test, it offered customers only two options as standard and “premium” products. The prices of the products were $ 1.8 and $ 2.5.
While 80% of the customers chose the “premium” product, 20% preferred the standard product. Could adding a third product and setting a point price increase revenues by targeting those looking for a cheaper option? In this context, the researchers added a third drink to the menu for a price of $ 1.6.
However, the cheap drink was not taken into account and the sales rate of the “Premium” product fell to 20%, while the sales rate of the standard drink, which was sold for $ 1.80, increased to 80%. This was clearly the wrong choice because price fixing had a negative effect here. If customers did not want a cheaper drink, perhaps it was necessary to include a more expensive drink on the menu.
A more expensive drink, priced at $ 3.40, was added to the menu. Much better results started to be achieved and only 5% of customers opted for the cheapest drink. These experiments reveal the importance of testing different prices, especially if you feel that you are pricing your products below their value. Because some of your customers will always prefer the most expensive price option. While this does not mean that any pricing plan is correct for every product, such a plan will help you remember that you can always find a suitable justification for setting higher prices.
- Keeping Prices Simple
In an article published in the journal Consumer Psychology, researchers state that prices pronounced with too many syllables always create a higher perception in customers’ minds.
In this context, to evaluate the following prices:
- 1.499.00 TL
- 1.499 TL
- 1499 TL
The first two give the impression of a much higher price than the third one. The reason for this is the word difference between “one point four hundred ninety-nine” and “one thousand four hundred ninety-nine”, although it may seem insignificant. This difference has an impact on the purchasing behavior of customers.
Make Smart Moves in the Marketplace with Your Pricing Strategy
All successful products and services are also products and services whose prices are determined in a planned manner. These prices have improved over time with the help of market observations and most importantly the feedback received from customers. In this context, while determining your pricing methods, you can be inspired by the experiences of other companies in the market instead of sticking to academic publications on pricing.