A pricing strategy is the method employed by a business to determine the best prices for its products and services.
Tech products and services belong to an ever-expanding market driven by the fast-paced evolution of technology and its use in different businesses across all industries.
Choosing the right pricing strategy for tech products and services is crucial for long-term business sustainability and customer retention. This article will explore various pricing strategies and highlight the best ways for you to determine which one is most suitable for your business.
WHAT DOES A SUSTAINABLE PRICING STRATEGY MEAN?
A sustainable pricing strategy is one that is flexible enough to withstand changing market conditions, meets customer preferences, achieves desirability, and most importantly drives performance. Tech products and services can either be physical or digital. The saturation of the tech market (especially since the COVID-19 pandemic) which has led to firece competitiveness between businesses, and the impact of the rising and falling foreign exchange rates in pricing, necessitates a sustainable pricing strategy that is dynamic enough to keep you in business.
Customers generally prefer to stick with businesses that do not review their prices too often without reason. If prices are adjusted, they want to feel that they have more value to gain and are not just receiving the exact same value for a higher price. This is where a sustainable pricing strategy is most effective.
When done right, a sustainable pricing strategy will:
- Attract and retain customers
- Inspire customer loyalty
- Increase revenue
- Boost sales
However, a poorly developed pricing strategy will
- Lead to loss of sales
- Devalue or undervalue your product or service
- Damage brand reputation
- Fail to target the right customers
FIVE TYPES OF PRICING STRATEGY
There are several types of pricing strategies that are tailored to suit different business niches whose sales are influenced by different factors. Understanding the types of pricing strategies is important before making a choice of the right strategy for your business. Here are five pricing strategies that apply to tech products and services:
- Dynamic Pricing Strategy:
A dynamic pricing strategy is that which changes and varies based on customer preference, and market trends and demands. A great example is Nigerian ride-sharing platforms. Their prices vary based on real-time situations such as fuel availability, traffic conditions, and driver proximity.
- Penetration Pricing Strategy:
This is specifically aimed at entering a market at a relatively low price, and then increasing prices over time. Great examples are music streaming apps that offer lower subscription rates to new users such as Boomplay, Audiomack, and Spotify.
- Freemium Pricing Strategy:
This is aimed at giving products for free, with an attractive premium version alongside that offers more features. Examples include design apps that offer a free version with the basic benefits, and paid premium versions with enhanced functionality. A great example is the Journey journaling app.
- Cost-based Pricing Strategy:
This pricing strategy is unconcerned by the market trends or competitor’s pricing. It is entirely focused on earning a fixed percentage of profit per product sold. In situations where the price does not match the benefits the product has promised in the eyes of the customer, this pricing strategy will fail to yield results.
- Value-based Pricing Strategy:
This aims to fix prices on products based on the customer’s perception of its worth. A popular example is Samsung android phones and Apple iPhone. Both are considered the best phones and customers are willing to pay whatever it takes to access such luxury and value.
HOW TO DEVELOP THE MOST SUSTAINABLE PRICING STRATEGY FOR YOUR BUSINESS
Developing a sustainable pricing strategy for your business requires you to:
- Know the pricing strategies that pertain to your niche.
- Know the market trends.
- Know your target audience and gather customer feedback: Customer-centricity especially when making decisions about your business will help you drive long-term success for your business.
- Know your competitors’ pricing.
- Determine a price range.
- Regularly review and readjust your prices if need be.
Navigating the complexities of pricing by yourself can be challenging without expert guidance. We have extensive experience and insights, which you can leverage to develop a pricing strategy tailored to your business niche. Let us help you create a sustainable pricing model that positions you for long-term growth and outstanding market performance!