It is difficult to ignore the significance of pricing in every business. Pricing makes a business generate measurable revenue along with profits. So, it is safe to say that pricing can be considered one of the most important factors for any business. When you price a commodity, you attach a value to that product. When a trade happens between two parties, both the seller of the product and the buyer benefits from that ‘value’. The customers give money to the seller for taking up the ‘value’ of the product while the seller gives the product for earning the ‘value’ i.e., money from the product.
The process determines the value a manufacturer/ seller receives when they offer goods or services. Both parties negotiate to mutually benefit at a profitable price. It varies based on different factors such as how much the manufacturer inputs, the value of the product in the market, the need for the product to the consumer, and more. Every business wishes to earn a profit from the deal but the prices might vary owing to the market conditions, changes in input cost, prices of supplementary goods, etc.
The pricing intelligence platforms like WebDataGuru are great tools which can help any business in determining the right prices for their products/ services. Without any manual data collection, these platforms and tools help in getting an insight into the competitor’s pricing and setting appropriate price points accordingly.
What Is Price Marketing?
Price is the value which you pay for getting goods or services. It is the amount for which the product gets exchanged between the seller and the buyer. Determining the price of a product is a crucial decision for any business and business owners often get perplexed about the same.
The business must tag such a price for their product which the target market is willing to pay. The pricing should also keep the profit margin in mind while hitting the target market. This is important for the business to flourish and grow.
Some of the factors which should be considered while setting a price for your product should be:
- The accountability of cost
- Customer’s expectations from the product
- Degree of prevailing competition.
The price intelligence platform can prove to be really helpful in gathering the competitor’s pricing data and setting a price which can profit you while still beating the competitors and appealing to the customers.
Right pricing is one of the key contributors to the success of any business. The top-level managers in organizations set the right pricing policy for achieving good sales for their products. When pricing is chosen carefully, it can not only help in beating the competition in the market but also boost the satisfaction level of the customers. Even distribution channels can get affected by the pricing policy.
It is to be known that both price and pricing are different terminologies. While price is the value of a product/ service, pricing is the process of translating the value of the product into a quantitative amount such as the dollar, rupee, euro, etc.
Different Types of Pricing Methods
The pricing methodology is divided into two namely- cost-oriented pricing and market-oriented pricing. Let’s have a detailed look at both of these methods:
1. Cost-oriented Pricing Method
This type of pricing method is used by businesses for determining the price of the finished goods. It is further divided into markup pricing, target return pricing, and cost-plus pricing.
- In the cost-plus method, the cost of production is taken into account and a certain percentage is added as a profit on the cost.
- In the markup pricing method, a certain percentage of the cost of the product is added to the end price for deciding the final price of the product.
- While in the target retuning price method, the business fixes the price of their product in such a way that they get back the amount they invested in the production process of the good.
2. Market-oriented Pricing Method
In this type of method, the price of the goods/ services is determined on the basis of trends or research of the market. The price intelligence platform can prove to be helpful here. This type of pricing is further divided into five types.
- In perceived value pricing, the price of the product is set considering the customer’s viewpoint. They also consider factors such as production cost, advertisement, promotions, and quality of the product.
- In the value pricing method, the organization manufactures a product of superior quality and cheaper cost.
- In the going-rate pricing method, the company determines the price of its products by considering the prices set by the competitors via the pricing intelligence platform.
- In the auction-type pricing method, the product is auctioned online via an e-commerce site and sold to the highest bidder.
- In the differential pricing method, the price is changed for different customers. The price changes across the area, target customer, and time.
Which Factors Affect Pricing?
Businesses go for price changes at regular intervals due to many aspects. And as discussed above, everything has an impact on the pricing of your product. Now, the main aspect to understand is which factors have the most influence over the pricing of a particular product or even a brand. So, there are mainly two types of factors that affect pricing: Internal and external factors. Let us take a closer look.
1. Internal Factors
- Organizational factors- Two management levels decide the pricing policy. The price range and policies are determined by the top-level managers while the lower-level staff decides the distinct price.
- Marketing Mix- The marketing mix should be in sync for the implementation of a price. The marketing mix must maintain the standard of the price of any product.
- Product Differentiation- Differentiation lies in the packaging, size, color, packaging, utility, and quality of the product. It makes the customer pay more for your product.
- Cost of The Product- Cost and price are related as cost influences the price. The price should not fall below the cost as it will lead to losses. Cost includes money spent on raw materials, wages, advertisement, promotion, salaries, etc.
2. External Factors
- Demand- The demand for a product impacts its price. When the demand is inelastic, a high price can be set and if the demand is elastic, a lesser price is to be fixed.
- Competition- The price needs to be competitive without affecting the quality. Estimating the competitor prices via the pricing intelligence platform can help in setting suitable prices to attract customers.
- Supplies- If the supplies can be sourced easily, the prices of the product can be set moderately. If the prices of the supplies increase, the price also rises. During the recession, the prices are decreased to attract customers while during the boom period; prices are increased for earning profit.
Importance of Pricing Intelligence Platform
As we discussed the various types of factors that affect pricing, it is now vital to understand the role of the pricing intelligence platform in every company. So, let us understand.
1. Sales Graph is Increased: Sales are vital to keeping the company running. The work needs to be there in order to get revenue. And the pricing intelligence platform helps you in achieving that only. In order to pump up your sales and for your consumer to pick you over your competitors, you need to provide the best price or value to them. You can get timely price comparisons, in-depth analysis, product offerings, deals, and offers of your competitors via pricing intelligence services.
WebDataGuru offers this in the best possible manner to all industries alike. The main goal of pricing intelligence is to ensure that your pricing is meeting all the company objectives which can be of being competitive, protecting a high margin, creating a good reputation, penetrating a new market, and so on.
2. Improves Customer Satisfaction: Every business has a presence because of its audience. Now, that holds true for every business: B2B or B2C, online or offline. Consumer helps you in making a presence in the market. And pricing intelligence software always keeps you updated about the latest trends and your shopper’s behavior via intricate algorithms. This in turn helps you in offering distinguished and unique deals to the consumers which they would like. Isn’t that amazing? Customers feel happy to find the best deal within their budget and even if your prices are high, you can promote the value for money aspect and get them interested in buying more from you.
3. Get Rid of Your Old Inventory: Retailers face this challenge often. Inventory management, selling off the old stock, buying new ones and so on. Pricing intelligence platforms inform you of the latest trending products that your customers buy and the products that are not that trending. This helps you in being prepared and selling off the inventory much before in good profits without any hassle. For instance, clothing brands always start end-of-season sale 2-3 months prior to the season sets in. This helps customers get good deals and the brand also benefits by clearing off the stock on time. It is a win-win situation
Hop on Board with the Pricing Wagon in 2023!
Pricing trends are going to be off the charts in 2023 because of the economic transformation. You must be prepared for the coming change with strong pricing intelligence software like WebDataGuru has to offer. So, contact us today to know more!