{"id":7850,"date":"2024-02-27T06:00:04","date_gmt":"2024-02-27T06:00:04","guid":{"rendered":"https:\/\/www.valuwit.com\/?p=7850"},"modified":"2025-01-14T21:54:15","modified_gmt":"2025-01-14T18:54:15","slug":"pricing-strategies-services-products","status":"publish","type":"post","link":"https:\/\/www.valuwit.com\/ar\/pricing-strategies-services-products\/","title":{"rendered":"Top 8 Pricing Strategies for New Services and Products"},"content":{"rendered":"<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">Customers, whether you\u2019re a business-to-business (B2B) or business-to-consumer (B2C) company, care about the price versus the value of an offering.<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">While price isn\u2019t the only factor to impact decision-making, it\u2019s certainly one of the most important factors buyers consider.<\/span> <span style=\"font-weight: 400;\">Research publication Demand Gen\u2019s <\/span><a href=\"http:\/\/e61c88871f1fbaa6388d-c1e3bb10b0333d7ff7aa972d61f8c669.r29.cf1.rackcdn.com\/DGR_DG247_SURV_B2BBuyers_July_2023_Final.pdf\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">B2B Buyer\u2019s Survey: Economic Uncertainties Renew Buyer\u2019s Focus on Price &amp; Functionality<\/span><\/a><span style=\"font-weight: 400;\"> showed that 79% of buyers prioritize price, while only 76% consider features and functionality.<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">The report highlighted three key elements that influence business decision-making.<\/span><\/p>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Easy access to pricing and competitive information\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Relevant content that speaks directly to key audience<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Communication that demonstrates industry expertise<\/span><\/li>\n<\/ul>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">It\u2019s worth noting that some pricing strategies work for some industries, while others don\u2019t. B2C companies like Pepsi, Nike, Netflix, and others use different pricing strategies compared to mega B2B players.<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">When pricing a new product or service, there are several factors to consider, such as the type of business, the offering, the size of your target market, and their expectations to name a few.<\/span><\/p>\n<h2 style=\"text-align: justify;\"><b>Top Pricing Strategies for Services and Software<\/b><\/h2>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">These are the most common pricing strategies for software-as-a-service (SaaS) and service companies.<\/span><\/p>\n<h3 style=\"text-align: justify;\"><b>1- Competition-Based Pricing<\/b><\/h3>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">As the name suggests, competition-based pricing is based on benchmarking with your competitors, their offerings, and their pricing.\u00a0<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">This pricing strategy is quite common among B2C and direct-to-consumer (D2C) companies.<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">Two examples of companies using competitive pricing are Amazon and Walmart. Both retailers are constantly changing\u2013or adjusting\u2013the prices of various products. That said, Amazon and Walmart use a combination of competitive and dynamic pricing strategies to generate more sales.<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">The major downsides of competitor-based pricing are its lack of sustainability and how it eats away at a business\u2019 bottom line<\/span><\/p>\n<h3 style=\"text-align: justify;\"><b>2- Cost-Plus Pricing<\/b><\/h3>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">Also known as the markup pricing method, cost-plus pricing involves adding a fixed percentage, or markup, to the cost of producing a product.<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">For example, if it costs $2 to make a cup of coffee and the brand wants to make a 50% profit, then they\u2019d sell each cup for $3. This would include each unit\u2019s share of the rent, baristas, electricity, and all incurred costs.<\/span><\/p>\n<h3 style=\"text-align: justify;\"><b>3- Price Penetration<\/b><\/h3>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">As its name suggests, the price penetration strategy is about getting your product in front of a wide audience. You enter the market with a low starting price to get the largest number of customers. This method is sometimes referred to as market penetration pricing.\u00a0\u00a0<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">Unlike cost-plus pricing, which doesn\u2019t take the customer buying trends into consideration, price penetration has a different goal. It\u2019s often used with price-sensitive customers and in saturated markets.<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">With price penetration, businesses seek to increase their revenues and profits by boosting sales, despite the lower profit margin.<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">One of the top disadvantages of this pricing strategy is it may cause consumers to expect low prices all the time. A brand may end up with sales from bargain seekers, and acquiring customers only because they are the cheapest in the market.<\/span><\/p>\n<h3 style=\"text-align: justify;\"><b>4- Price Skimming<\/b><\/h3>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">The price skimming strategy involves launching new products at a high price and gradually reducing that price over time. Typically, the company reduces prices as competition increases. However, if it prices its services too high, it risks being able to sell its products to customers to begin with.<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">Athletic wear retailer Nike uses the price skimming strategy for its products. Price skimming isn\u2019t common among service-based businesses like consulting firms or SaaS.<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">This method is considered the opposite of the price penetration) strategy.<\/span><\/p>\n<h3 style=\"text-align: justify;\"><b>5- Value-based pricing Pricing<\/b><\/h3>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">Also known as consumer-based pricing, the value-based pricing strategy is about uncovering your customers\u2019 willingness to buy your products.<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">As its name suggests, consumer-based pricing focuses on the consumer, their expectations, and the value they\u2019re getting.<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">Companies using this pricing method have an opportunity to listen to customer feedback, improve their products, and increase customer retention and loyalty.<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">One of the most popular companies using value-based pricing is Starbucks. They combine research with customer analysis to set their target price for new products and price maximization for price increases.<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">The biggest downside with the consumer-based pricing strategy is the amount of time needed and research involved.<\/span><\/p>\n<h3 style=\"text-align: justify;\"><b>6- Dynamic Pricing<\/b><\/h3>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">Also known as flexible pricing, the dynamic pricing strategy relies on companies adjusting the prices of their products and services based on demand.<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">When demand is high, they increase their prices; when it\u2019s low, their prices drop.<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">Amazon and Walmart use a combination of dynamic pricing and competitive pricing. Their dynamic pricing relies on algorithms and data of how many people add a product to their wish list or cart, and frequent purchases, among other variables.<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">Similarly, AC, heating, and ventilation maintenance-offering companies increase the maintenance service fees in seasons when demand is high.<\/span><\/p>\n<h3 style=\"text-align: justify;\"><b>7- Tiered Pricing<\/b><\/h3>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">The tier-based pricing method is the most common among tech businesses. It works well because it accommodates different customers and needs.<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">Companies using the tiered pricing method offer 3 to 4 tiers or levels. Each tier has several features and benefits.<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">A major advantage of this method is how it allows companies to cater to different target audiences, whether individuals, small startups, or large corporations.<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">It offers customers the freedom of choice and upgrading when needed, in addition to discounts on annual subscriptions.\u00a0<\/span><\/p>\n<p><img fetchpriority=\"high\" decoding=\"async\" class=\"alignnone wp-image-7856\" src=\"https:\/\/www.valuwit.com\/wp-content\/uploads\/2024\/02\/valuwit-strategy-pricing-300x300.png\" alt=\"pricing strategies for services and products\" width=\"238\" height=\"238\" srcset=\"https:\/\/www.valuwit.com\/wp-content\/uploads\/2024\/02\/valuwit-strategy-pricing-300x300.png 300w, https:\/\/www.valuwit.com\/wp-content\/uploads\/2024\/02\/valuwit-strategy-pricing-1024x1024.png 1024w, https:\/\/www.valuwit.com\/wp-content\/uploads\/2024\/02\/valuwit-strategy-pricing-150x150.png 150w, https:\/\/www.valuwit.com\/wp-content\/uploads\/2024\/02\/valuwit-strategy-pricing-768x768.png 768w, https:\/\/www.valuwit.com\/wp-content\/uploads\/2024\/02\/valuwit-strategy-pricing-1536x1536.png 1536w, https:\/\/www.valuwit.com\/wp-content\/uploads\/2024\/02\/valuwit-strategy-pricing-2048x2048.png 2048w, https:\/\/www.valuwit.com\/wp-content\/uploads\/2024\/02\/valuwit-strategy-pricing-12x12.png 12w, https:\/\/www.valuwit.com\/wp-content\/uploads\/2024\/02\/valuwit-strategy-pricing-700x700.png 700w\" sizes=\"(max-width: 238px) 100vw, 238px\" \/><\/p>\n<h3 style=\"text-align: justify;\"><b>8- Freemium Pricing<\/b><\/h3>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">This is more of a pricing tier, usually associated with the tiered pricing method. However, it\u2019s one of the most common approaches in SaaS businesses.<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">Freemium pricing involves offering a basic tier or set of services free of charge. The purpose here is to give a taste of the software or service for free, where many users will opt to upgrade to a paid tier to enjoy the rest of the features.<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">Design platform Canva is one of the most popular SaaS businesses using the freemium pricing method. Email marketing giant, Mailchimp is another example.<\/span><\/p>\n<h2 style=\"text-align: justify;\"><b>Pricing Pitfalls to Avoid<\/b><\/h2>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">Before you choose which pricing strategy to use for your service-based or tech business, there are pricing pitfalls to avoid.<\/span><\/p>\n<h3 style=\"text-align: justify;\"><b>One-Price-Fits-All<\/b><\/h3>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">The biggest mistake you can make with your service pricing strategy is to assume one price suits all your audiences. That\u2019s why most SaaS businesses use a tier-based pricing strategy. Each tier has some features or perks and serves different types of customers.<\/span><\/p>\n<h3 style=\"text-align: justify;\"><b>Being Vague About Pricing<\/b><\/h3>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">Another mistake companies make, especially when they\u2019re just starting out is not being clear about how their pricing is calculated.<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">They keep their pricing under wraps in the hopes of giving a different price for each customer. Not only does this make the sales process unnecessarily long, but it also overuses the company\u2019s resources. While companies may claim that this is some form of tailored pricing, it may result in unfair pricing for different customers.<\/span><b>\u00a0<\/b><\/p>\n<h3 style=\"text-align: justify;\"><b>Pricing Too High or Too Low<\/b><\/h3>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">Companies will often price their products or services too low to beat the competition, going too far in terms of a penetration-pricing strategy.\u00a0<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">Pricing your products too low means a squeezed profit margin, <a href=\"https:\/\/stride-co.com\/blog\/business-budget-tips\/\" target=\"_blank\" rel=\"noopener\">especially as costs increase<\/a>.<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">If you\u2019re a B2C or D2C business, offering the lowest price amongst your competitors may give you an initial bump. But it\u2019s not easy to sustain this low price. Something will have to give. Often it\u2019s quality, which means you\u2019ll lose customers down the line.<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">On the other hand, offering too high a price may get customers to shy away from your product. If you\u2019re not offering stellar perks or features to go with that sky-high pricing, customers will look the other way.<\/span><b>\u00a0<\/b><\/p>\n<h3 style=\"text-align: justify;\"><b>Not Studying Your Competitors<\/b><\/h3>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">Businesses will often look at what their competitors are charging and try to offer a slightly lower price. However, it\u2019s important to take a closer look at the competition.<\/span><\/p>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">How long has this competitor been in the market?<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">What pricing strategy or strategies are they using?<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Did they change their pricing strategy in the past year or even decade?<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">How do customers perceive their products?<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">What are customers\u2019 top problems with the competitors\u2019 products or services?<\/span><\/li>\n<\/ul>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">Answering these questions helps you create a better pricing strategy and identify areas where you can stand out from the competition.<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">The bottom line, pricing isn\u2019t always a straightforward process. Understanding fundamental pricing strategies is only the first step. Consider testing different approaches, and understanding the individual needs of your niche and your company\u2019s potential.\u00a0<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">Ultimately, your goal isn\u2019t only growth in numbers,<a href=\"https:\/\/www.valuwit.com\/ar\/customer-acquisition-and-retention\/\" target=\"_blank\" rel=\"noopener\"> it\u2019s both <\/a><\/span><span style=\"font-weight: 400;\">customer acquisition and retention.<\/span><\/p>","protected":false},"excerpt":{"rendered":"<p>Customers, whether you\u2019re a business-to-business (B2B) or business-to-consumer (B2C) company, care about the price versus the value of an offering. While price isn\u2019t the only factor to impact decision-making, it\u2019s certainly one of the most important factors buyers consider. Research publication Demand Gen\u2019s B2B Buyer\u2019s Survey: Economic Uncertainties Renew Buyer\u2019s Focus on Price &amp; Functionality [&hellip;]<\/p>","protected":false},"author":1,"featured_media":7851,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"om_disable_all_campaigns":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"default","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"set","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[29],"tags":[],"class_list":["post-7850","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-english-posts"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.8 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>What Are the Best Pricing Strategies for Services &amp; Products? | VALUWIT<\/title>\n<meta name=\"description\" content=\"Pricing your product, service, or software can get very confusing. 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