6 Pricing Strategies to make your Customers buy more
Setting prices can be tricky!
First, you are scared of setting the price too high not to scare potential customers away. With a low price the fear of making losses sets in. So, where is the middle ground?
Your price is one of the factors some consumers consider before buying from you. It determines how much you sell and how much losses or gains you make. Thus, pricing is a key aspect of your business that you can’t get wrong.
In this article, we discuss pricing strategy and the types of pricing strategies you can adopt to delight customers and still get positive cash flow. Let’s dig into it.
Pricing Strategies: How to Set a Price Point That Maximizes Profit
What is a Pricing Strategy?
Pricing strategy is the method or approach used to set the price for your product/service while considering the cost of production, market, consumers, competition, etc.
When setting the price for your product/service, ensure that your pricing strategy favours your business and customers. This ensures that you satisfy your customers and yourself alike.
With the right pricing strategy, you can make your customers buy more and maximize profits without compromising quality. Let's examine some of them below.
Types of Pricing Strategy
Pricing goes beyond setting a price and adding a markup, even though that is also part of it. But beyond that, there are many other pricing strategies you can employ to make your customers buy more. They are as follows:
1. Cost-plus Pricing Strategy
This pricing strategy involves calculating the cost of producing a product/service and then adding a markup price which will serve as your profit.
For example, if you sell handmade Ankara bags, and it costs you #4000 to make a bag. You can decide to make a 50% profit from your cost of production, which will be #2000, and then add it to the cost price. This brings the selling price to #6,000.
Now, while this is a great strategy for setting your product/service prices, it may not always be the best. This is because it doesn’t influence consumer’s buying behaviour. And that brings us to other pricing tricks you can implement.
2. Bundle Pricing Strategy
The bundle pricing strategy involves putting similar products together and selling them as bundles to customers.
For example, as a baker who makes cakes, doughnuts, small chops, and cocktail drinks for parties, you can bundle your cake and small chops and encourage customers to get small chops packs when they buy cakes for their events. This allows you to upsell and cross-sell with ease.
To get the best out of this, bundle your fast-moving and slow-moving products together. This ensures that your slow-moving products get sold quickly, leveraging on the fast-moving goods.
For example, if your cocktail drinks get sold out fast, but your doughnuts stay on the shelf for a long. You can bundle the doughnuts with the cocktail drinks, encouraging customers who come for the drinks to also buy doughnuts by giving a little discount.
Check out HubSpot’s Free Sales Pricing Calculator to set great prices for your products/services.
3. Tier Pricing Strategy
The tier pricing strategy is similar to the bundle strategy. However, the goal is to sell more units of the same product.
For example, you own a merch store where you sell customized t-shirts with inscriptions. Now, if you sell one t-shirt for #6,000 with one inscription, you can decide to create a tiered pricing where you sell three t-shirts with different inscriptions for #16,500.
When you use this pricing strategy, the customer sees buying 3 shirts as the best deal. This is because the cost is lower by #1500 than if they bought the shirts for the individual price of #6,000 each.
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4. Psychological Pricing Strategy
The psychological pricing strategy targets how the human brain thinks to draw people in. To succeed with this pricing strategy, you need to know how your customers think.
One way to use the psychological pricing strategy is to place an expensive product beside a less expensive one, which is the one you are trying to get them to buy. When customers see this, they automatically assume that the product with a lesser price is a steal and a great deal they must take.
Another way to use the psychological pricing strategy is using the “Get 5 at the cost of 4” tactic. This communicates “free” and who doesn’t like a free thing? No one.
You can also use the psychological pricing tactic by leveraging the 9-digit effect. This is when you say a product costs #799 instead of #800. Now, because humans read from left to right when we see #799, our brain assumes the price to be closer to “#700” instead of “#800”.
5. Penetration Pricing Strategy
Penetration Pricing is a strategic pricing model used by business owners in entering a competitive market. It involves setting a low price to draw customers’ attention to them and away from competitors.
With penetration marketing, profit is not the immediate focus. Instead, the attraction of customers is the crux. However, with time, the price is gradually increased, with the hope that the customers already attracted will stay loyal to the brand.
To succeed with penetration pricing, emphasize the product’s value rather than the price.
6. Dynamic Pricing Strategy
Also known as surge pricing or demand pricing, a dynamic pricing strategy prices a product/service based on demand or time. Here, variable prices are employed instead of fixed prices. Thus, the product’s price can change at any time, depending on demand.
For example, during the cash scarcity period in Nigeria in 2023, the demand for cash surged. And this led POS operators to charge more to give out cash.
Other industries like airlines, hotels, ride-hailing companies, etc. also employ dynamic pricing.
The Best Pricing Strategy for Business Owners in Africa
As a small business owner, finding the thin line between a price that your customers can repeatedly pay for and which will also make you good profits is where your focus should be.
With these pricing strategies, you can compel your customers to buy more to make more sales. However, one thing you mustn’t forget in this is providing quality products/services that customers cannot resist.
At Triift Africa, we are passionate about helping small business owners get their pricing right, as well as grow from hustle to portfolio with access to collateral-free loans and business resources.
Need to discuss a business challenge or need some of our resources on marketing and business growth? Then visit our website or send a mail to hello@triift.africa
So, which of these strategies will you be adopting soon? Let’s talk in the comment section. Think we nailed this content? Then share with a business owner you know that is struggling with pricing.
