Pricing Strategy Matrix
While developing your pricing
strategy, it is important to remember that there is an implicit relationship between price, value and volume. In
developing your pricing strategy, it is important to recognize the dynamic market relationships between price,
perceived value and volume, or quantity.
We usually will pay higher prices for things that have high-perceived value and are scarce in terms of quantity
available like limited edition Ferraris. At the opposite end of the spectrum, we expect to pay low prices for mass
produced items that are not readily distinguishable among competing brands like copy paper.
Determining a value price is a little more difficult because one person’s value could be another person’s
expensive, or yet another person’s perception of cheap. So how do you determine the right price for your products
or services? It requires taking into account all three factors of price, value and volume to achieve the right
balance of all these factors to maximize customer acceptance and your sales and profits.
Pricing is customer centric and therefore you should not rely on what someone else tells you are good for your
customers. Their customers are usually not the same as yours. Test your pricing strategies to confirm what works
best for you, given your cost structure, profit goals and what your specific market will consume at various price
points is essential.
There are many options and methods to establish the price of your products or
services. The small business pricing strategy matrix (chart below) takes into account three attributes of
setting prices, volume, perceived value and price in a range of each attribute. You can use the chart below to:
-
determine where your current pricing places your products
or services on this chart
-
re-assess your pricing to your pricing objectives
-
compare your pricing chart to that of your major competitors to gage your
relative product/service pricing position in the marketplace
Small Business Pricing Strategy Matrix
|
Price
|
Low |
Medium |
High |
|
Perceived Value
High
—
—
Medium
—
—
Low
|
Promotional
Temporary Price
|
Value
Good quality
at a reasonable price
|
Premium
Highest quality product/service at a premium price –
prestige brand
|
|
Commodity
Lowest quality with no differentiation among
competitors
|
Skimming
Mediocre quality
at a high price
|
|
Volume
|
High |
Medium |
Low |
More Small Business Pricing Strategy information...
Standard Pricing
Methodologies
Promotional & Discounting Pricing
Methods
New Product/Service Pricing
Methods
How to Develop Your Pricing Strategy
A through analysis of all the critical factors to consider will lead to the best decision for
your business. For more information on an analysis and custom pricing strategy for your business, contact us
now 1-866-875-2534.
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