Optimizing your Marketing Pricing Strategy:

How to Price Your Product or Service

Marketing pricing strategy can be one of the biggest challenges for businesses launching a new product or service. Pricing is one of the critical four P’s of the marketing mix – the others being Product, Place (Distribution) and Promotion. Get these four components right, and you’re well on your way to having a marketing strategy that will support and grow your business.

Price your product too high, and too few customers will buy. Price it too low, and you may sell a lot but your margin is close to zero. Depending on your target market segment, there are times when a product priced too low will actually reduce the number of customers – the low price may imply an inferior product.

So how do you know what is the right price, so you can maximize profits and business growth?


marketing pricing strategy is something of an art.

But that doesn’t mean you should just go with hunches or intuition. It is important to understand the factors that go into good pricing strategies in marketing, and bad ones. The factors to consider can be summarized in the 3 C’s:

  • Costs
  • Customers
  • Competition

Costs

Probably the most important factor when deciding how to price your offering is what it costs you to produce and deliver it. The cost involved in producing your product or delivering your service typically defines a minimum price in order for you to make a profit.

When considering costs, make sure you include all expenses that go into making or delivering your product or service. That includes not only raw materials, but also tools and supplies, labor, and other resources needed to service your customer.

Customers

Another factor going into your pricing strategy is the customer demographic that you are targeting. 

What is their typical budget? How much do they value your solution (and can you position it in a way to maximize that value)? Are you targeting a high-end (higher “luxury” price) or low-end (budget price) segment?

Competition

Finally, you can't set your pricing without considering the prices of competitive offerings.  What is the price of competitive solutions in the market? How might competitors respond to your product pricing? What is the cost of the customer choosing an alternate solution to their need?


Remember that the largest companies are not always the most profitable. The difference often lies in how they approach pricing: to achieve superior profitability, marketing pricing strategy must be an integral part of marketing strategy planning and not an afterthought. 

For more help with planning your market strategy including pricing, check out our marketing strategy ebook and workbook here.

Start Planning Your Pricing Strategy

You should develop your pricing strategy as part of your overall strategic planning activities.  Our seven step process will help you develop an overall marketing strategy that aligns with your business goals and market needs.  Learn more about the seven step process here.