Business Pricing Strategies

When developing a business plan, aspiring business owners often make the mistake of setting a pricing strategy to match the vendor with the lowest price on the market. This is a losing decision, especially for small businesses. When the price of a product comes to the forefront, the value proposition will be negated. If you are in a niche market, larger competitors can, by reducing operating costs, "squeeze out" any business that tries to compete on price alone.

How do you price and stay in your niche? What should you analyze in the market you are interested in?

Maximum price

Research your competitors' prices for the product you're interested in, and analyze the limits of the price caps. What is the highest price on the market and who is offering it? Keep in mind that the highest price is not necessarily the maximum price.

Price Elasticity

If the demand for a good or service does not change when the price changes, we speak of price elasticity. Secondary products and goods that can easily be replaced by similar ones react immediately and sharply to price fluctuations.

Choosing a pricing strategy

Once you understand consumer demand in your chosen market, analyze all of your costs, supply chain and profit goals. Cost-plus pricing may be the easiest strategy for a small business. With this approach, you determine the break-even point for your product and then add a percentage markup to get the final price.

If you have no or few competitors, you can choose a value-based pricing strategy, where the price is based on the perceived or perceived value of the product or service.

You can set prices based on competitors' prices or initially set high prices (cream skimming) or, using a price penetration strategy, set prices knowingly low in order to enter a competitive market quickly and promote the product through customer recommendations. After a while, increase prices to the general level.

Competitive Analysis

Analyze not just the price, but the full range of services your competitors offer. How sensitive to price are consumers in your chosen niche? What additional services do your competitors offer?

Carefully study your competitors' websites. If you see good ideas, take note of them and implement them yourself. Pay attention to mistakes and avoid them. Find out how your competitors promote their products and services. Use online marketing tools and analyze their sites.

Your name

Develop a name for your brand. This will increase the recognition and sustainability of the business in the event of a price war. Find unique "chips" to promote that differentiate your business.

Improving Procurement

If you want to win the competition, you have to constantly work on improving your supply chain. Working with wholesalers is not an easy process. A low price charged by a distributor may indicate poor quality of the product they provide. In case of a problem, the client will remember his bad experience and will not come back to you for a new product. Arabesco sideral helps to find partners around the world, checks the reliability of counterparties and their banking history. Arabesco sideral's buyers negotiate and conduct test purchases of goods that are of interest to customers.

Arabesco sideral conducts market research on its partners in the early stages of establishing their business. We conduct a thorough study of the competitive environment, identify customer needs and analyze their price sensitivity. Recommendations from Arabesco sideral's marketers and buyers help our customers avoid problematic low price positions in the market.