Formally known as Financial Capability Week – Talk Money Week encourages us all to talk openly about MONEY.
On behalf of Female Success Network, I would like to spend this week giving startups some of my thoughts on financial matters when it comes to developing a new business.
(Disclaimer: This post is for informational purposes only. It should not be considered legal or financial advice. You should consult with a financial professional to determine what may be best for your individual needs.)
Today I would like to demystify “Pricing Strategies” for UK startups.
There are lots of different pricing strategies that your business can adopt, below I will detail the various options:
Penetration Pricing – As the name suggests this strategy allows the business to penetrate the marketplace, you may also know this is “loss leading”. This initial pricing is normally used as a launch strategy sacrificing profits and sometimes even causing the business a loss. The idea behind this being the long-term exposure that you have gained for when you initiate your new pricing structure.
Bundle Pricing – This is when a business, bundles together multiple products or services for a lower price than if purchased individually. This is a great way to increase the customer’s value of perception, but you need to ensure that you are still making a profit.
Premium Pricing – This is when you set your pricing higher than your competitors. This is a great strategy for anyone offering a unique or luxury product or service. Bare in mind with this strategy that you need to share your customer’s perception of value, so your marketing/ packaging etc should all support the premium price point.
Price Skimming – Imagine this being the exact opposite of penetration pricing. Your product or service enters the marketplace at a premium price maximising on the new offer of an exclusive product or service. The price then drops as competitors enter the marketplace.
Price Anchoring – This is when you offer high priced products and services next to your really low priced products and services. Seeing extremes side by side can help your customers perceive the less expensive item as an absolute bargain making them more inclined to purchase.
Economy Pricing – This is for price-conscious customers looking for a non-luxurious almost ‘no frills’ product or service. The only way to make sure that this pricing strategy works is to ensure volume!
Psychology Pricing – This strategy encourages emotional over logical spending. A great example of this is the ‘99p’ effect. Research has shown that consumers tend to focus on the large denomination rather than the small denomination – and so this strategy could make more people likely to buy your product or service.
Now it’s time for you to put this into practice and ensure you hit 2019 with a bang!