How much should you charge for your goods or services? This is a question that all businesses need to address, and the answer can make a huge difference to your success. Whether you’re a large retailer with hundreds of lines, or you offer a few tailored goods or services, getting your pricing strategy right is crucial to both turnover and profit.
There are a number of pricing strategies that you can try:
Price maximisation, for example, aims to generate greater revenue for the company by prioritising profit.
Market penetration aims to attract a high volume of customers by providing goods or services at a lower cost than the competition.
Price skimming is the process of bringing in new goods or services at a lower price – and then gradually increasing the price once they are established.
Economy pricing, as the name suggests, aims to attract price-conscious buyers at the expense of profit.
How to refine your strategy
Any of these pricing strategies may be appropriate to your business – or you might try a combination of several approaches. But how do you decide which to strategy use and establish whether it is working? The answer is of course, testing. This is where Business Intelligence tools can help. Gathering all the information on different pricing models and analysing it by hand would be an extremely slow and painstaking task. But by implementing different pricing strategies, measuring the results, and interrogating the data through easy-to-use BI dashboards, you can very quickly see what is working and what isn’t.
An example of how this works in practice can be seen in the way change++ helped Bistrot Pierre to see the effects of changing its menu and pricing in restaurants across the country. change++ provided Bistrot Pierre with a flexible and comprehensive Business Intelligence system, underpinned by a data warehouse to combine data from its restaurants across the country. This enabled Bistrot Pierre’s managers to quickly see the effects of loyalty schemes and promotions, analyse the sales volume of individual dishes, see the effects on the spend per head of the customer and more. With this level of detail at Bistrot Pierre’s fingertips, individual managers are able to assess the effects of different pricing strategies and more easily meet KPIs.
Is price optimisation right for you?
The short answer is yes. Price optimisation isn’t just for hospitality or the retail sector. Logistics and delivery companies, for example, can maximise profit and efficiency by balancing pricing for different levels of service (next-day or signed for delivery, economy service, large parcels and so-on) and testing the results. For manufacturers of original goods, pricing can be particularly tricky. How do you price your products against other, similar offerings to achieve the best business outcome? The answer is, again, test, measure and re-test.
Whatever goods or services you provide, a pricing strategy should be central to your business plan. And if you want to do it right – talk to a Business Intelligence expert like change ++.