Marketing is made up of four components: product development, promotion, positioning or distribution and price. We can think of the first three as the part where a business sows its seeds, and pricing, the fourth component, is the harvest. The right price will never be able to make up for any weaknesses in the first three components, but a mistake in the evaluation of price can wipe out the effects of all the work that goes into them.
If it is true that setting the right price for a company’s products and services has always been one of the most complex processes, the advent of new media and new methodologies linked to the web, has made the process even more complex, and its rules even more open to change: pricing strategies have changed, and today they need to be innovative to keep up with the times; however, most companies still set their prices using pre-internet methodologies, without taking into account the transparency and price awareness that new technology offers consumers today; technologies which even change the all-important competitive landscape. They do so using price decision techniques that give priority to company and market growth, often putting long-term profit in second place, without realising how this strategic decision undermines the foundations of the company’s future success.
And it is in this context that the rules and precepts of strategic pricing come in handy; these can be divided into six main phases;
- Understanding the value of the product or service.
- Clear communication of this value to the public.
- Segmentation of the client base and respective price range.
- Creation of policies to manage and monitor price variations.
- Management of communication regarding any price changes.
- Appropriate management and monitoring of the competition.
The only way for a company to be able to create strategic prices, maintain high profits, and keep its market healthy is by taking these six factors into account.
