The reason pricing and customer base is important in business is because without the correct pricing strategy, you won't have a business or, at least, for long. This is why knowing who you are marketing to is important.
Different Successful Pricing Strategies and Examples
- Higher cost that goes with better quality- This strategy can work within the limits of what a particular customer is willing to pay. A great example of this is the Banana Republic. When the original founders were first starting their business of selling items with a safari theme, they found when they increased the cost of a particular make of shirts sales actually took off.
- Great quality products sold at a lower cost in order to reach a broader customer base- A great example of this is Martha Stewart and her items when they were sold in the K-Mart stores at a lower cost. Because she appealed to a very broad base of customers, she was able to run a profit by selling high quality items in what many see as a store that sells discounted products.
- Lowest cost, convenience, and the "hidden treasure fevor"- A great example of this is Dollar Tree. This is a store where everything is actually a dollar. You can actually find many nicely made items here and you can't beat the price even online because of shipping costs.
- Higher prices and convenience- This is where the term "convenience store" comes from. Sheetz is a great example of this. This convenience store is found off of many major travel routes and has gas pumps, restroom facilities, food to eat, and other products that someone may need immediately if they are traveling.
Pricing Strategies with Limited Success or No Success
- Excessively high costs that appeal to a narrow demographic- I had an personal experience with a network marketing company that sells health and wellness products that illustrates this point well. Although their products were high quality, their cost was also extremely high for the area I lived in. The end result was that a few well-to-do business people were successful in selling to their wealthy customer base, but that was it.
- Low cost, but terrible qualiity- A local discount electronics chain sold me bluetooth at what I thought was a reasonable price compared to its competetors. However, the quality was so terrible that the bluetooth only worked half of the time. Because of the continuous headache it was causing, I eventually returned the product to get my money back. Then I settled on an earbud with a wire from another store because of the higher cost of competitor's blue tooth.
- Moderate to low cost items with inconveniences included- A local grocery store in my area had multiple locations strategically placed on traveling routes. However, they have narrow entrances to the store and narrow aisles with little stands "cluttering" the aisles so that you are almost running into other customers as you shop. A grocery chain from up north opened one large location with multiple customer conveniences resulting in a challenging competetor for the old chain. While the new store invests directly in customers, the old grocery chain's latest investments are robots that buzz around the narrow aisles.
Summing It Up
Some pricing strategies that work are: reasonably higher costs with better quality, lower costs coupled with greater quality that appeals to a broader customer base, the lowest cost coupled with some conveniences and "hidden treasures," and higher prices for immediate convenience. Some moderately to unsuccessful pricing strategies are: excessively high costs that appeal to a narrow demographic, low costs and terrible quality, and moderate to low costs that are coupled with inconveniences.
What is your pricing strategy and how is it working with your customer base in your business and which one or more of the four successful strategies applies to your business?
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