How to set the price of Products and Services?
Posted: Sat Feb 01, 2025 8:56 am
Pricing: the second of the 4Ps of Marketing
Pricing is not a simple task. Much more than calculating costs and profit margins, the act is intrinsically linked to factors such as branding, positioning strategy and market competitiveness.
Once this is remembered, it is possible to realize that value and price are indeed different things and, at the same time, co-dependent – after all, not every cheap product is bad, just as not every expensive product is the best in its category .
For a strategic understanding of the price to be charged for a given product or service, some pillars of pricing need to be considered – and we demystify each of them in the following topics.
How to set the price of a product or service?
The composition of the price of a product or service must include the following aspects:
Choosing a pricing model
The choice of pricing model depends on the armenia telegram screening positioning that the brand wants to give to each product/service sold. From this perspective, it is correct to state that each item/solution must be subject to a pricing strategy appropriate to it.
Among the known pricing strategy options are:
Markup pricing
This is a simple pricing model that is widely used for selling commodities. However, many organizations, given the lack of or little observation of Osterewald's Business Model Canvas , wrongly practice this strategy for products and services that lack a value perspective (emotional, brand and customer perception).
To calculate prices under this pricing matrix, production costs and the predefined margin on such costs (markup) are considered.
Pricing based on competition against competitors
Airlines are excellent examples of players who adopt this pricing model , the purpose of which is to remain competitive in relation to the prices offered by competitors.
And if such competition is common, strategic measures need to be adopted to keep the risk of losses under control – after all, you may even know the final price and, in some cases, the pricing formula of your competitors. However, it is not always possible to know the aspects of the real cost composition. Be careful!
Pricing by perceived value
This is, without a doubt, one of the most challenging product and service pricing models on the market. This pricing is determined by how the customer perceives the value of the product/service offered.
To this end, in addition to the financial aspects inherent to the item/solution, its significance is taken into consideration, based on the way in which the market itself desires and links quality aspects to the product/service.
In this model, the strong performance of the Branding and Marketing teams, aligned with the product squad, is fundamental, especially so that the message of value (not price) linked to the item/solution must be perceived to the point of awakening the desire of consumers, without going overboard (it's not nice to be "canceled" for minor flaws, right?).
Pricing Strategy vs. Product or Service Life Cycle
Although some institutions mistakenly understand the application of the pricing strategy based on the product/service life cycle as being a pricing model, in fact such a strategy is more about the dynamics of the chosen model than a model in itself.
Pricing is not a simple task. Much more than calculating costs and profit margins, the act is intrinsically linked to factors such as branding, positioning strategy and market competitiveness.
Once this is remembered, it is possible to realize that value and price are indeed different things and, at the same time, co-dependent – after all, not every cheap product is bad, just as not every expensive product is the best in its category .
For a strategic understanding of the price to be charged for a given product or service, some pillars of pricing need to be considered – and we demystify each of them in the following topics.
How to set the price of a product or service?
The composition of the price of a product or service must include the following aspects:
Choosing a pricing model
The choice of pricing model depends on the armenia telegram screening positioning that the brand wants to give to each product/service sold. From this perspective, it is correct to state that each item/solution must be subject to a pricing strategy appropriate to it.
Among the known pricing strategy options are:
Markup pricing
This is a simple pricing model that is widely used for selling commodities. However, many organizations, given the lack of or little observation of Osterewald's Business Model Canvas , wrongly practice this strategy for products and services that lack a value perspective (emotional, brand and customer perception).
To calculate prices under this pricing matrix, production costs and the predefined margin on such costs (markup) are considered.
Pricing based on competition against competitors
Airlines are excellent examples of players who adopt this pricing model , the purpose of which is to remain competitive in relation to the prices offered by competitors.
And if such competition is common, strategic measures need to be adopted to keep the risk of losses under control – after all, you may even know the final price and, in some cases, the pricing formula of your competitors. However, it is not always possible to know the aspects of the real cost composition. Be careful!
Pricing by perceived value
This is, without a doubt, one of the most challenging product and service pricing models on the market. This pricing is determined by how the customer perceives the value of the product/service offered.
To this end, in addition to the financial aspects inherent to the item/solution, its significance is taken into consideration, based on the way in which the market itself desires and links quality aspects to the product/service.
In this model, the strong performance of the Branding and Marketing teams, aligned with the product squad, is fundamental, especially so that the message of value (not price) linked to the item/solution must be perceived to the point of awakening the desire of consumers, without going overboard (it's not nice to be "canceled" for minor flaws, right?).
Pricing Strategy vs. Product or Service Life Cycle
Although some institutions mistakenly understand the application of the pricing strategy based on the product/service life cycle as being a pricing model, in fact such a strategy is more about the dynamics of the chosen model than a model in itself.