If you are a business owner then you must be aware that price is not just a random number. Pricing is a dynamic concept that helps you exemplify your business.

Price is one of the most significant tools of marketing. Pricing is a multilayered subject. It covers a vast arena of concepts that defines a particular pricing method.

Anyway, the pricing structure is ruled by the two most prominent concepts – Net Price and List Price.

This blog is going to throw some light on these two approaches.

What is Net Price and What is its Significance?

In very simple terms, the net price is the final or actual price that the customers pay. It’s the price which includes taxes, costs and discounts.

The current market operates in a certain manner and pricing plays a vital role in the same.

Moreover, net prices help companies achieve their profit margins. To top that, with the cut-throat eCommerce market, competition can smoothly undercut the pricing strategy your company has and offer more to potential customers.

What is List Price and What’s its Role?

List price is the price any buyer pays without any discounts. It’s the price that’s also called as “Headline” price. Basically, list price is a premium price that a customer would pay if they are buying from your company.

List price has a great significance if a company is adapting the premium pricing model. For instance, whenever an iPhone is launched it is priced at a premium and then eventually the price is reduced. This is done when a company wants to emerge as a brand which depends on the list price.

List price is also known as “catalog” price. List price is determined by the factors like cost of the product, market research, ad spent and the like.

Choosing a Pricing Concept

As said before, pricing is a multilayered matter and it can have different results with different models.

Pricing strategies are often made keeping in mind the customer base, their tastes, product portfolio, branding and market dynamics.

While deciding on the concepts that you want to adopt for your product, the first thing that should come is the profit margin.

If you believe that you want to have higher profit margins then you should go for the List price concept. But there’s a drawback that your competitors can price their products lower than yours and take away that business.

On the other hand, if you want to have lower profit margins and offer better deals then you must go for net price.

 

Points to Keep in mind While Deciding

Pricing concepts are much deeper than we may assume. That’s the reason one must completely study the pricing that they want for their business.

Similarly, while deciding what kind of pricing you want you should look for the below pointers:

  1. Customer: Your shoppers are the ultimate guide to your pricing strategy. Never forget, that customer is the king! Know your customer base and understand what they are looking for in a product and offer them that in a price model that can be a win-win for both.
  2. Calculate cost+pricing: You must have a clear background about your costs and the profit margin that you want to price a product or service.
  3. Analyze your competitors: It’s very important that you know what your competition is doing to offer better solutions to your customers.

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