How to improve your pricing strategy and avoid bad debt (1/2)
In business, pricing can be a delicate matter. Of course it can dramatically affect your sales and profits, but pricing will also fundamentally determine how people view your company. In a new two-part blog series we will highlight the leading approaches championed by two of the world’s most successful companies.
Of primary importance is a comprehensive awareness of your market. This may sound rudimentary, but it is crucial to conduct market research to get a head-start. Simple pointers set you in the right direction:
- How much is your competition charging?
- What makes your products or services different?
- How much does the customer expect to pay?
These basic questions are imperative forerunners for implementing any pricing strategy. In the words of David Ogilvy, advertising pioneer and founder of Ogilvy Group:
‘People who ignore research are as dangerous as generals who ignore decodes of enemy signals’.
The appropriate pricing strategy is deduced by gauging how you want to position your product or service. A simple cost-plus approach of production cost and profit can fail because it doesn’t take into account the level of demand or market expectations. Constantly reviewing prices is good practice to ensure your product or service is positioned where you want it.
Apple’s premium pricing strategy has seen them achieve phenomenal global success. In interview last year Apple CEO Tim Cook told Bloomberg’s Businessweek:
“We never had an objective to sell a low-cost phone. Our primary objective is to sell a great phone and provide a great experience, and we figured out a way to do it at a lower cost.”
Cook’s words iterate Apple’s marketing philosophy, which can be broken down into four simple laws:
- Offer a small number of products.
- Focus on the high end.
- Give priority to profits over market share.
- Create a halo effect that makes people starve for new products.
Apple succeeds in implementing its premium pricing strategy through differentiation. This involves exporting a product that is unique and attractive, and Apple goods have always been ahead of the crowd. By generating demand, Apple is able to dictate its prices and offer a product that stands for exclusive luxury.
Stop by next week to learn about easyJet’s pricing strategy. Right here on Wednesday 16 July, you’ll find everything you need to know about positioning yourself as a budget brand while avoiding bad debt.
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