Top 15 pricing strategies for your small business

Imagine the plight of a country’s economy, sans the financial contribution from small businesses! Thus it becomes extremely important to encourage the growth of small businesses. Here we take a look at one of the most important aspects which small businesses should consider an increase in their revenue - Pricing strategy.

What are the different pricing strategies?

Below is a gist of 15 product pricing strategies that can help you skyrocket your small business towards a profitable future and to earn more average small business profit. 

Product pricing strategies acts like a catalyst when it comes to the small business growth alliance

Price skimming

This one among product pricing methods is extremely beneficial for new products. It’s basically about keeping the rate of the product at a high level in the beginning. Thus one can achieve maximum initial sales. Eventually, the pricing can be brought down to keep up with competitors in the market. 

The high prices in the beginning will make your product feel ‘special’. Also, the eventual reduction in prices will attract those who are looking for cheap products. So, it’s mostly about shooting two birds with a single stone.

Pricing for market penetration

This is yet another one among the retail pricing strategies for new products. With an initial low price, one will be able to attract lots of customers. Thus over time, the initial losses due to low pricing can be very easily covered up.

Product mix pricing strategies

When you are selling an assortment of products and services, this particular set of retail pricing strategies can come to your rescue. This is based on the fact that the strategy required varies as per the product when there are different sets of products for sale. The main strategy that comes under this set is called “Product line pricing.” This is all about keeping different pricing for different products in a business. It considers the cost differences between the various products along with the buyers’ attitudes towards the pricing.

Optional product pricing

This is one of the competitive pricing strategies small businesses should definitely try out. When extra accessories are there with a key product, their prices are added along with the actual price.

Captive product pricing

This one is very important in the rule book of pricing strategies marketing for increasing profit. In this case, some essential products are sold with the main product. The prices of these essential products mean a lot for the business.

By-product pricing and bundle pricing: 

• By-product pricing: When by-products are produced while manufacturing a key product, these by-products can be sold off for a price. 

• Bundle pricing: Every item in a bundle is given for a cumulative price, instead of selling off for individual prices.

Price Adjustment Strategies: 

These include a set of competitive pricing strategies, in which the base prices of products are adjusted in order to keep up with changing situations. The main strategy under this is called “Pricing at a premium.” Here the prices are kept higher than what competitors offer. It works in the beginning stages of a particular business.

Economy pricing

This is very important among the types of pricing strategies. Under this, the target is set at price-conscious customers. This particular strategy saves the day by reducing costs for production and marketing. It helps large companies well. But even small businesses can carefully work it out and ensure a set of dedicated customers.

Psychology pricing

Being another important one among the types of pricing strategies, here companies play with the psychology of the buyers by forcing them to be more emotional and less logical. Some of the ways used under this technique are:

• Discounts

• Price ending

• Differential pricing

Segmented pricing

This is where the same product is sold off for different prices to different sections of customers. This segmentation is done based on many aspects such as location, the nature of customers, launch time, etc.

Discount pricing

Here discounts are given to customers in various forms and for varying reasons. This brings in a change in the actual pricing of the product/service. The reasons for offering discounts can include off-season purchases, large bulk purchases, etc.

Allowance pricing

Strikingly similar to discount pricing, this strategy includes extra money given to retailers by companies, so that they can promote the brand in question. This strategy includes two types of allowances namely; trade-in allowance and promotional allowance.  

Promotional pricing

This strategy has various forms. The key idea behind using this technique is about reducing the price of the products to an extremely low level, so as to attract a lot of initial customers. As a short term strategy, this method is extremely effective and highly beneficial for small and medium-sized businesses. It can help in two ways: To increase sales and to reduce the inventories.

Geographical pricing

Here the price of products is changed as per the location of each buyer. For example, if a customer is near to the manufacturing area, the price could be very low. This is because the shipping charges are cut off from the price. But otherwise, if the customer is far away from the manufacturing area, the shipping prices might get added to the base price. This will end up at a high price to be paid by the customer. There are five types of strategies under this: 

• FOB pricing: Under this, the customer is expected to pay for the freight from the manufacturing unit to the point of sale. Thus the distance of the customer from the area of manufacture matters a lot in this strategy. 

• Uniform delivered pricing: This is the opposite of FOB pricing. Under this, the customers are expected to pay a fixed average freight charge, irrespective of the distance. 

• Zone pricing: This is somewhere in the middle of the two above mentioned pricing methods. Under this, a company sets up various zones. The prices would then vary for the customers as per their particular zone. 

• Basing-point pricing: Here a basing point is set up by the company. Then the freight charge is taken from the customers, as per the distance from this basing point. 

• Freight-absorption pricing: Here the seller takes up the freight charges on his shoulders, so that he can get more business from a specific area.

Dynamic pricing

As opposed to the usual fixed price policy, in this case, companies keep changing the prices of products as per the need of individual customers. This particular pricing strategy is widely used off late.

Well, that brings our brief list of 15 useful strategies to a close. And who would deny the importance of product pricing methods, when the benefits of pricing strategies are so clearly evident? We believe these strategies will definitely increase the annual revenue for small businesses.

With an influx of high profits, small and medium businesses would need the help of good accounting automation tools to sync online payments. SaasAnt Transactions and PayTraQer can definitely save the day! SaasAnt Transactions makes the whole process of automating transactions simple. It comes with great features like unlimited imports and deletes, a multi-feature dashboard, the ultimate level of security for your data (transfer by 2048 bit SSL with 256-bit encryption), etc.  As for PayTraQer, it offers the most powerful form of automation to sync each one of your online payments. A tool worth its name!