Pricing strategies

[kotajikikox]

If you are planning to build a business or even if you are just a consumer, I believe you should be aware of pricing strategies used by most sellers. If you want to build a business this can help you dictate a pricing point for your goods or services and as a consumer this might help you be more responsible in buying.

1) Value based pricing. Basically a product is priced based on the percepted value of the product by the people. This allows for more profit since sellers can offer higher prices. Higher percepted value means maybe the business is credible and has some associated value to it for example Apple products. You can argue they can be a bit cheaper purpose wise but since they are a big name, they can afford to price massively.

2) Competition based pricing. This will be helpful for sellers who are wanting to break through a market. If a market is highly competitive, you might want to sell your goods for a lower price to attract more customers to you. It can help you get customers but you might not be able to get as much profit due to low pricing.

3) Cost based pricing. This might be the most common where the sellers just add a certain percentage on top of what they have spent for making of the product. Including the operational costs and whatnot. This is a lot simple to calculate and preferred by most beginners.

[gunhell16]

You are right in saying this, op, that is exactly what should be done when, for example, building a new business, especially if the goods must be of high quality to build a good community of consumers.

And what is also important is that the costing should not be too high for the profit we will get from the business we will build, that is why the pricing should also be somewhat realistic and will also be patronized by the target consumers since we are talking about business here.

[Odohu]

The pricing is basically dependent on the factors you already listed which are the value of the product, the competition in the market, and without any doubt, the cost of the goods. One must also try to ensure they maintain a reputation that is needed to excel in business because taking advantage of people when you are selling high value product that is in high demand, can be very disastrous should customers begin to see better alternatives. This is where many businesses miss out on the bigger picture. There is a company in my country called Jumia, an e-commerce store that dominated the business but at they introduced so many policies such as charging deliveries fee per item even if all the items are ordered by the same customer and the same time and are not bulky. Now we have a company called Temu that charge only a single delivery fee and even have better incentives. This is how Jumia is gradually struggling to remain in business.

[Frankolala]

Due to the factors that you stated above is the reason why a local farmer with a good size of farm cannot process his crops from planting stage to the market stage because he doesn't have all the knowledge to do it alone, since there are people who are professionals in giving a price to a commodity due to those factors in the OP. A local farmer will sell his farm produce when it's ready to harvest to who will buy all the crop untouched. That buyer will be the one to harvest the crop. sort them out size by size, good and bad. The new buyer might not be the final seller; he will sell the products to a wholesaler that he will transport the products to, who will determine the price of the farm produce based on the demand and supply in the market. The retailers are the final people who determines the price based on how much they bought from the wholesaler.

[Pi-network314159]

1) Value based pricing. Basically a product is priced based on the percepted value of the product by the people. This allows for more profit since sellers can offer higher prices. Higher percepted value means maybe the business is credible and has some associated value to it for example Apple products. You can argue they can be a bit cheaper purpose wise but since they are a big name, they can afford to price massively.

value base pricing usually takes time to achieve. for it to be achieved it needs time, dedication, focus, consistency, determination and overall capital. first you must build a brand. how does this happens? it happens by proving to the masses the need for using your product or how important it is to use your product, and that will come with several reasons. sometimes you need your product to be used and advertised by some public figure like the music stars, footballers etc. and that will automatically make your brand be known by many. just as this popular products GUCCI, PRADA and GIVENCHY is used by this top artist. so this makes this product superb that even when the fake one is duplicated, it can still be bought high without the knowing of the person who bought it since they cant tell the difference.

2) Competition based pricing. This will be helpful for sellers who are wanting to break through a market. If a market is highly competitive, you might want to sell your goods for a lower price to attract more customers to you. It can help you get customers but you might not be able to get as much profit due to low pricing.

in this category you may sell low to attract customers at first and later you can gradually increase your price to make profit. but if after increasing your price an they refuse to buy then you must look for product needed most in that environment that no one is selling and add to your business. by so doing you have attracted more customer to yourself and people will always have reason why they will buy from you because you have all they need.

 

[d5000]

Well, let's apply this to Bitcoin This could become helpful for people who want to sell or spend their BTC eventually.

You'd say "but there's a clear market price for Bitcoin!" and you would be correct. At a single moment, normally across exchanges there's a quite narrow price range.

However, you can apply these methods to the question in which market phase you should sell your Bitcoin.

The simplest one here again is ...

3) Cost based pricing.

You bought your Bitcoin for a certain price. Sell them when you got a profit you're comfortable with (e.g. 50 or 100%). Miners can apply this too, taking their cost as a base and deciding when to sell and when to accumulate.

1) Value based pricing.

This is also a quite interesting strategy for Bitcoin. The idea is that you estimate how valuable would be Bitcoin if it eventually stabilizes. Will it replace gold? Or will it remain niche? The Total Addressable Market strategy does exactly that, it's one of the methods institutional investors use to decide when to sell.

2) Competition based pricing.

This one instead may not apply really to Bitcoin at this moment. Bitcoin's competition is currently much weaker. It could become an issue if you fear that some altcoin is about to "flip" Bitcoin's importance, but most altcoins, including Ethereum, address different markets as they are neither decentralized nor really lack a single point of failure.

If Monero cames close to BTC however you may have to adjust your Bitcoin selling price due to "real" competition. This is extremely unlikely, but not completely impossible.

[Odusko]

All the factors you mentioned can only come into play when there is low presence of government in such a country because in advance country where there is price regulations and control, allowing a free flow market won't work and can't operate with in such a system, the government will control price of commodity. Unlike in your country may be there is no regulations just like in my country too, were market goods owners give any price they sole wish to give and don't give a demo about the consumers own feelings, this results into high inflation also.

[Alpha Marine]

These days, packaging and advertising play a bigger role in the price of a commodity. It leans towards the "value-based" you mentioned, but most times, the product doesn't have more value than the other, but is priced higher than the other because of the way it was advertised and packaged.

You can see that certain goods or services sold for $20 somewhere can be sold for $100 in another place. It happens with clothes, shoes and even food in different restaurants. One doesn't have more value than the other; they're both the same, but the illusion of more value is in the presentation (packaging) and advertising.

[passwordnow]

2) Competition based pricing. This will be helpful for sellers who are wanting to break through a market. If a market is highly competitive, you might want to sell your goods for a lower price to attract more customers to you. It can help you get customers but you might not be able to get as much profit due to low pricing.

This kills the other competitors. And the ones that stays on the competition is able to dictate the market when they're able to eliminate most of the competitors that they are dealing with. But I wouldn't encourage to stay low in prices just to win the customers. If you've got an MVP product or service, there is no need to decrease it because you and the competitors are going to be mostly the victims here while the consumer wins. Well, as a consumer that's fine but this is the quickest way to go out of business when prices are forcefully decreased just for that sake to survive.

[HONDACD125]

Pricing strategies basically has nothing to do with consumers because a consumer will have to pay the price decided by the seller if they need to buy the product, but these strategies can be useful for business owners or vendors because they can sell different products at different prices based on how the market offers for the same products in general.

I also believe that the pricing strategies will usually be applied based on the demand from consumers and after close evaluation of what the consumers want and whether they will pay a certain price for a certain good or not. As you mentioned, Apple and its products, the company knows that it has a consumer base that is going to pay any price they ask for to get their hands on the products because the consumers are mostly from the elite class, and they don't care much about the price, but only want quality.

On the contrary, a company that creates products that it sells to the middle or lower middle class, it would know that its consumers aren't going to pay a lot of money for the products, so it can't demand much, otherwise, the consumers will start looking for alternatives.

[AmoreJaz]

These days, packaging and advertising play a bigger role in the price of a commodity. It leans towards the "value-based" you mentioned, but most times, the product doesn't have more value than the other, but is priced higher than the other because of the way it was advertised and packaged.

You can see that certain goods or services sold for $20 somewhere can be sold for $100 in another place. It happens with clothes, shoes and even food in different restaurants. One doesn't have more value than the other; they're both the same, but the illusion of more value is in the presentation (packaging) and advertising.

It is how you strategize to market a certain product. It can really be cheap but you can sell it more to others. But you need to "re-package" per se. This means, marketing. When you are in a business, you should know how to do such strategy as it can help you grow your business. This is why, it is not only about the education that you attained that can assure the success of the business but it is how you manage and operate the business. Experience will also teach you a lot of things on how to operate and maintain a certain business, however, more knowledge about your craft will go a long way when it comes to business growth and success.

[Stella Mese]

These days, packaging and advertising play a bigger role in the price of a commodity. It leans towards the "value-based" you mentioned, but most times, the product doesn't have more value than the other, but is priced higher than the other because of the way it was advertised and packaged.

You can see that certain goods or services sold for $20 somewhere can be sold for $100 in another place. It happens with clothes, shoes and even food in different restaurants. One doesn't have more value than the other; they're both the same, but the illusion of more value is in the presentation (packaging) and advertising.

advertising strategy is certainly a good delivery to be attempted in penetrating the desired market, the better the quality offered, the better the consumer interest in the product. However, the price value is the main determinant to be considered in the advertising that occurs considering the need for price adjustments in it, by providing detailed information, of course the shipping area factor determines the price.

[BenCodie]

Great thread! Some context about the kind of product/stage of business and which pricing strategy to use could help, as the pricing strategy depends a lot on what is being sold and how it is being sold. For example, a business focusing specifically on online sales and marketing, without any kind of personal touch, may benefit more from competition based pricing than it would value based pricing. Generally, value needs to be highlighted to the buyer and rarely can that be done with a website alone (sometimes it can be done with online marketing material too however even then, a human touch can go a long way). If a human touch (in the form of a sales team or representative) is there, value based pricing can usually got a long way for profit. For mass production and sale of smaller ticket goods/products, cost based/competition makes most sense.

[btc78]

1) Value based pricing. Basically a product is priced based on the percepted value of the product by the people. This allows for more profit since sellers can offer higher prices. Higher percepted value means maybe the business is credible and has some associated value to it for example Apple products. You can argue they can be a bit cheaper purpose wise but since they are a big name, they can afford to price massively.

this should not be considered by beginners as it will not be received well by the customers

when you are starting out you do not have a name for yourself just yet and the customers will not be very keen on paying money for nonexistent value just yet so if you are just starting out scrape this idea immediately

[viljy]

I believe that the price is always formed first on the basis of production costs, and only then adjusted in two ways. In one case, depending on the competition. An example would be the pricing of AMD video card lines, depending on the prices of NVIDIA corresponding-tier graphics cards. In another case, an adjustment is made based on the value that is formed in the consumer's mind by marketing, an example of this is Apple products. So these are not separate pricing methods, but elements of a single pricing system.

[Dave1]

I believe that the price is always formed first on the basis of production costs, and only then adjusted in two ways. In one case, depending on the competition. An example would be the pricing of AMD video card lines, depending on the prices of NVIDIA corresponding-tier graphics cards. In another case, an adjustment is made based on the value that is formed in the consumer's mind by marketing, an example of this is Apple products. So these are not separate pricing methods, but elements of a single pricing system.

I think the example relates not to the cost of the operations, but the business owners, specially having like if you are in the selling business. So for sure if you have bought a item in the wholesale price then you really have to put like 10% on top of it as your profit margin.

And that is the basic though, and we don't want to complicate things. But there are also certain items that really cost a lot so the profit margin is going to be higher. In any case, the price strategies laid out by the OP could give some of us an idea to begin with.

[kotajikikox]

I believe that the price is always formed first on the basis of production costs, and only then adjusted in two ways.

You have a point. A seller can't sell his goods cheaper than what it took to produce the goods. After the production costs are computed, other factors will be factored in that are not exactly fixed like time and workload and brand name. And then adjust it based on the market.

So these are not separate pricing methods, but elements of a single pricing system.

You can use two rather than one but I still believe these are different strategies that sellers choose among from when they are ready to launch their goods.

[Fiatless]

If you are planning to build a business or even if you are just a consumer, I believe you should be aware of pricing strategies used by most sellers. If you want to build a business this can help you dictate a pricing point for your goods or services and as a consumer this might help you be more responsible in buying.

You have to consider all the types of prices before setting the price of your goods and services.  Value pricing covers mainly luxury products that are cherished by the rich. You should know that it is not only you that offers such goods and services so your price should be competitive. You are not an NGO that focuses on profit maximization, so your price should exceed your cost of production.

[slapper]

Pricing is never only about costs, competition, or value. Buying anything "responsibly" is a performance. Check out how individuals brag about getting a good deal or show off their ethical shopping as virtue

Most new businesses are stuck at "beginner move" because they are too scared to charge for real effect. Sellers afraid to charge for meaning, buyers afraid to pay for it, everyone hiding behind numbers. At the same time, the whole economy is moving towards dynamic pricing, algorithmic tweaks, and micro-segmentation. Why? Because people have no idea what is  “worth” until someone tells them

Competition-based pricing is dangerous. Usually just a detour to commodification hell, where nobody wins except the platform. The only way out is to stop treating buyers and sellers like machines and start establishing trust, stories, and real connections between people. But how can you share it to a boardroom that is obsessed with "market share"?

You want the modern truth? Pricing is just code for who gets to belong and who gets left out. The "strategy" is mainly about keeping someone out of a tribe or reinforcing it. We'll keep acting like pricing is a science until people get it. That is the inconvenient freedom nobody wants to internalize

[lionheart78]

All the factors you mentioned can only come into play when there is low presence of government in such a country because in advance country where there is price regulations and control, allowing a free flow market won't work and can't operate with in such a system, the government will control price of commodity. Unlike in your country may be there is no regulations just like in my country too, were market goods owners give any price they sole wish to give and don't give a demo about the consumers own feelings, this results into high inflation also.

I believe government price regulation is limited only to some goods and not all item's price is regulated by the government.  Items that are non-essential consumer goods like clothing and electronics pricing,  I think are not regulated by the government since they are purchased individually for personal use and not for production.

In this category, what @OP stated about pricing may apply.