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How to Produce a Profitable Bottom Line with a Proven Pricing Strategy

By: Robert Hennessey

How to Produce a Profitable Bottom Line  with a Proven Pricing Strategy

Evaluating business-to-business pricing strategy options will help you formulate a successful pricing plan that will produce a profitable bottom line.

Your business pricing strategy is a crucial decision as one of the four “Ps” of the marketing mix, (Product, Pricing, Promotion, and Place). It is integral because it affects other marketing mix components including, sales promotion and distribution channel decisions (Place). Therefore, your choices regarding the pricing strategies must be closely analyzed and selected to deliver the positive effect on your business you seek.

Why Have a Pricing Strategy

Your pricing plan has positive and negative effects on your customers and affects the perceived value of your product or service. If you price your products too low, they may appear too cheap. Price too high and the perception of value may suffer, or customers may buy a better-perceived price-valve alternative from competitors.al

It is usually wise to employ several pricing strategies at one time. The specific types and methods of small business pricing strategies you will need to take into account depending on the overall marketing objectives of your company. It is also important to keep in mind that a successful pricing approach is not conceived in a vacuum, but is formulated to be part of a profitable overall product/service mix pricing strategy.

Most pricing methods emanate from business to consumer marketing, (B2C) companies and may not be appropriate for a consultative business to business marketing, (B2B) firms. Developing your business pricing plan and knowing which pricing methodologies may require substantial trial and error without the help of a marketing professional who is well versed in pricing strategy and tactics.

Where to Begin in Establishing a Pricing Strategy

Establishing a pricing strategy that is appropriate for your business is critical to your marketing success. Pricing affects your products or services development, channel strategy, and promotional activities. To develop a successful pricing strategy, you should take the time and effort to obtain answers to some vital questions.

Fundamental Questions Needing Answers

  1. What are the critical industry markets and product or service segments for your business?

  2. Do we need to develop different pricing for different industry and market segments where we sell our products or services?

  3. How do we define the short and long-term objectives of our pricing strategy?

  4. Do we know the price elasticity of our products or services?

  5. Do volume levels affect our cost structure and what pricing adjustments may be required?

  6. Is there an opportunity to bundle products and services and if so should this be done and how should bundling be executed?

  7. What does our discount pricing structure need to be involving various markets and channels?

  8. In what ways do we anticipate competition to react to our pricing?

In getting answers to these questions objective research and analysis are paramount. Relying on suggested pricing from your suppliers or your sales organization is neither impartial or been subjected to review that is specific to your business. While these types of pricing inputs are good starting points for data collection, they are far from sufficient to make crucial pricing decisions.

How to Establish Your Small Business Pricing

  1. Consider working with a professional marketer

  2. Do your homework and gather competitor price lists and other pricing information from the marketplace

  3. Do not call your competitors for their prices - this is illegal in the U.S.

  4. Make careful decisions on the pricing strategy and methods best suited for your B2B marketing efforts

There are three primary types of pricing strategies used by most businesses usually in combination. There are also many types of subset strategies within each of the main categories of pricing strategy. Because there are so many options, it is wise to do your homework before jumping to any conclusion on just what your pricing strategy, should be for your business. The key factors that impact the appropriate pricing strategy are:

  • Industry
  • Market Segment
  • Marketing Objectives
  • Distribution Channels
  • Customer Base
  • Competitive Situation

All these factors above play a vital role in deciding your pricing strategy.

Your Bottom Line
To grow your sales and unlock new business possibilities conducting a thorough pricing analysis and building a pricing strategy will be extremely helpful.

More Pricing Information 

7 Surefire B2B Pricing Methods Drive Profits

6 B2B Pricing Guidelines Boost B2B Profitability

B2B Promotional Discount Pricing Methods that Work

When Is a Low Pricing Strategy Good for Your Business

Why You Need to Display Prices On Your Website

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