{"id":19431,"date":"2023-03-27T09:00:31","date_gmt":"2023-03-27T07:00:31","guid":{"rendered":"https:\/\/diariodiunconsulente.it\/?p=19431"},"modified":"2023-03-24T15:07:35","modified_gmt":"2023-03-24T14:07:35","slug":"price-strategies-in-a-changing-market","status":"publish","type":"post","link":"https:\/\/diariodiunconsulente.it\/en\/2023\/03\/27\/price-strategies-in-a-changing-market\/","title":{"rendered":"Price strategies in a changing market"},"content":{"rendered":"

by Alberto Aleo<\/a>
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One for the worst consequences of the crisis <\/b>is that negotiations have turned into a race to the bottom<\/b>. <\/span>Nowadays, even our loyal customers might not agree with some of our sales conditions, and globalisation <\/b>and the Internet allow them to make purchases elsewhere, leaving us stranded, with a free-falling turnover<\/b>.<\/span><\/p>\n

Also, challenges such as the launch of a new product or internationalization <\/b>present us with complex problems: what price <\/b>should we set in a market we don\u2019t know?<\/span> Let\u2019s try to get our bearings through this article.<\/span><\/p>\n

\"Price<\/p>\n

What is price?<\/span><\/h2>\n

The duty of market price <\/b>is to <\/b>allow supply <\/b>and demand <\/b>to reach equilibrium<\/b><\/span>: the point where the two curves, with opposite trends, meet. If I sell at a lower price, I\u2019ll have more customers willing to buy but fewer companies willing to produce and vice-versa. The resulting figure (see the first picture) allows for commercial exchange. <\/span><\/p>\n

What does this mean? In order to establish at what price we should sell our products, we need to analyse both demand and supply: production costs<\/b>, size and behaviour of the customer base<\/b>, what competitors <\/b>offer and other indicators that allow us to generate this graph.<\/span><\/p>\n

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What mostly happens is that we focus on one of the two curves forgetting that price is defined by converging interests<\/b>.<\/em><\/span><\/p>\n<\/blockquote>\n

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What is the purpose of price?<\/span><\/h2>\n

Prices and price lists are useful tools, not only to generate profit<\/b> margins<\/b>, but also to manage many company strategies<\/span> such as discounts<\/b>, relationships with distributors<\/b>, customer loyalty<\/b>, problem-solving, bonuses and the incentive system <\/b>of the sales team. When we define our strategy, we should consider all these aspects, ensuring we have adequate leeway.<\/span><\/p>\n

How can we define a price strategy?<\/span><\/h2>\n

Dropping price isn\u2019t the only strategy, and at times it isn\u2019t even the most effective way to get ahead of market competition<\/span>. <\/span>There are at least two more: competing on product performance <\/b>or on the quality of customer relations<\/b>. In practice, a company can promise three things to stand out in the market: \u201cmy offer is the cheapest\u201d, \u201cmy products have the best performance\u201d or \u201cmy way of managing relations with you will be more engaging\u201d<\/em>. <\/span><\/p>\n

Companies often adopt a mix of these three, but to break the mould, one really should pick one and stick to it, as opposed to trying to be a \u201cjack of all trades\u201d, an unpopular trait in tradesmen.<\/span><\/p>\n

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Choosing the way we want to compete will affect our pricing<\/b> strategy, which influences how the pricing lever <\/b>is used.<\/em><\/span><\/p>\n<\/blockquote>\n

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Lever-Price – Copyright Alice Alessandri, Alberto Aleo – Passodue<\/figcaption><\/figure>\n

What is the pricing lever and how is it used?<\/span><\/h2>\n

Imagine a full bathtub and a little boat floating in it: the bathtub is value<\/b>, and the boat is price<\/b>. These two categories are fundamentally linked in the mind of the client because the former supports the latter. Price, therefore, indicates the value of our offer, and it refers not only to the products and services, but to the entire company, its history, its reputation, and the people who are part of it. In fact, what we sell is an offer system, as explained in our post What do I sell and why?<\/span><\/a><\/span><\/p>\n

So, which strategy should we adopt? Bearing all of this in mind, we believe there are four pricing strategies<\/span>: best price<\/b>, value price<\/b>, power price<\/b>, <\/b>and premium price<\/b>. <\/span><\/p>\n

Each is better suited to a particular type of company, and if carried out correctly, it can support its value, strengthen customer relations, make price lists efficient, and much more.<\/span><\/p>\n