Power of Product Pricing:
What are the factors that decide the Product Pricing?
Product Pricing is not a simple thing to do for organizations. This can be the one factor that decides businesses to sustain and live longer or not sustain and die slowly.
Now, if you are into a global business, on a higher level, the factors that may decide the pricing of the product(s) are:
Product Type: Tangible, Not tangible (Services)
Environment: where you are selling your product on the globe? And also the purchasing power of the people.
Competitors: If competitors are in the market, then who are your competitors? What is their price range for the similar or near to your product?
Pricing Strategies: How do you prefer/plan to enter the market? What pricing strategies to adopt? Cost-plus Pricing, Competitive pricing, Value-based pricing, Price skimming, Penetration skimming
Segment: who are your target customers?
Demand: What is the demand for the product?
Brand awareness: How well your brand is known or accepted in that geographic area
Psyche or behavior: mindset or behavior of the customers may differ according to the different cultures and customs in different countries
So these factors or some of these or more are taken into consideration depending on the product type before pre-production or pre-launching when you want to label your product price.
For the imaginary purposes, if the product mix of a company is A, B, C, and product lines and their prices are as follows.
Now if you are selling a tangible product individually there is no confusion while adopting a price for a retail product line. For example, the product price is based on the formula Product unit Price = Product unit cost (Fixed + variable Cost) + Profit = Total Product Price.
However if you are bundling the products (A2 = $20 + B1 =$ 12 + C2 = $24) = 56$. However, to attract consumers to buy the bundling we may reduce the total price from $56 to $52. (here for businesses there might be a slight decrease in marginal profit with an increase in revenue depending on sales)
Still, the consumer may not prefer the bundling price because the consumer may not like the product B1 in the bundling product and might be interested to buy B2. Hence the consumer may prefer to buy individual products.
However, if the product is intangible (service-oriented) and if you have only bundled products to buy, then the choice for customers is very less. It is like, locking out the customer that might be looking for the products that best fit into or suits their business needs.
The customer may not like any of the choices given in bundled products. Hence, the customer may switch to other competitors’ products where they have more choices or options.
For example, in the below scenario, it is mandatory that you have to buy either Product A or B or C and the available choices that are grouped under Product A or Product B or product C. This doesn’t give customers wide choice or freedom to buy according to their business models or scenarios.
Instead, the customers need to have wider choices or options and freedom to select from the given bundled products individually that suits their business needs. For example, the customer may choose the whole of product A + B3 from product B or any products from all the products available
That might be flexible and increase the value of the products that are provided to the needs of the customers. In the below scenario, where even though the products are bundled there is a freedom of choice to select according to the requirements of the business.
Hence, empower your product price by providing, choices, options and freedom along with product price that might add value to the customers in the products you are providing.