How various types of pricing methods affect your business

by Souvik on 19/12/2017
Pricing Methods
How do business owners price their products or services? At a fundamental level, pricing strategies are determined based on three main dimensions: cost, demand, and competition. ‘Cost’ refers to the cost of production. ‘Demand’ obviously indicates the demand of the product in the market, and ‘competition’ refers to the price that your competitors have tacked on to similar products. Did you know that the pricing method you choose to use has a strong impact on your final sales volume and total profit margin? Check out the following types of pricing methods and identify the one that suits you best.

Premium pricing
Penetration pricing
Economy pricing
Price skimming
Psychology pricing
Bundle pricing

Premium pricing

Premium pricing involves having a price that is higher than most competitors. Companies tend to use this strategy to highlight the superior quality and uniqueness of their products. For brands that follow this technique, it is vital that the packaging and after-sales service are of the highest level.

Penetration pricing


Most companies tend to use a penetration strategy to improve their market share. The idea is to price products at a lower value than competitors for better market visibility and improved sales volumes. While this seems to be the most popular strategy among new brands, it negatively impacts revenue generation. This pricing method is best used as a temporary tool for market penetration.

Economy pricing

Currently followed by many brands, economy pricing is all about bringing production and marketing costs down to be able to have low product prices. With the global economy still in recovery mode, the number of price-conscious consumers is still a valuable consumer segment. Economy pricing can do wonders in this scenario.

Price skimming

This strategy allows companies to have a higher price for new and unique products. Brands can start lowering their prices once competitors start launching similar items. This strategy works perfectly for companies that continuously roll out new products and ranges.

Psychology pricing

This technique is based on human psychology. Research has shown that an average shopper responds to some pricing structures better than others. For example: having a price of INR 99 instead of INR 100 can lead to a higher conversion rate.

Bundle pricing

Most small businesses follow this strategy to attract consumers without having to lose a lot of revenue. The idea is to have combo packs of different utility items on offer, at a price which is lower than the individual costs. The increased volume of products sold balances the reduced profit margin, making this concept a sustainable one.

Wrapping it up

Identifying the right pricing method is key for sellers across all fields. As a registered seller on Amazon, you can enjoy expert advice and support on pricing methods and a wide range of other topics as well. You can then watch your business grow as your smartly-priced products are exposed to Amazon’s global customer base. So, what are you waiting for? Register yourself on Amazon today.
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