Pricing research simply means that a business pays attention to what its competitors are charging for the same or similar items and adjusts their prices accordingly. Although this does sound like an easy thing to do, there is a lot to it, and this is why some business owners and leaders put off the task or ignore the need to complete it entirely.
This is a bad idea because there are actually a number of reasons why pricing research is a crucial element to improving and growing any business. Read on to find out what some of them are. If you’ve been delaying this task for any reason, understanding the reasons why it’s so helpful might spur you on.
Get Ahead Of The Competition
When you run a business, there is sure to be competition – this is inevitable, and even if your business is a niche one, there will be others who, if not exactly the same, will certainly be similar. It’s best not to ignore these competitors, and in fact, paying close attention to them is often the best course of action.
This is certainly true when it comes to pricing research. You can use a conjoint experiment to discover what their pricing is like through in-depth market research. Using that information, you can ensure that you set your prices at a lower level or that you offer something extra (like free shipping). Or perhaps you’ll choose to make your pricing higher than your competitors, but make sure that your marketing talks about the high quality of what you’re offering. It’s only when you have this information that you can make these all-important decisions and know you’re doing it right.
Launch New Products Confidently
You can’t stick with the tried and true products that you’ve always sold if you want to grow your business. At some point, you’ll need to expand and bring in new – yet ideally complementary – products to your line. This is how you can not only capture new customers but you can keep the interest of older ones.
Yet it can be a struggle to launch a new product. You only have one chance at it, and if the launch goes badly for any reason, you might find you have a lot of stock that you can’t sell or that you’ve spent money on advertising that won’t work.
Although there are a number of things you need to do to ensure your new product launch is a successful one, something that is absolutely crucial is that you must get the pricing right. If you go too low from the start, it will be hard to put the price up when you see you could charge more. If you go too high, people will buy elsewhere unless you can persuade them there is a reason for your higher price.
Knowing what the average price for that product is and what your profit margins mean that you can choose the right pricing and be confident in it. This will make your launch more successful.
Understand How Much A Customer Will Pay
Pricing research isn’t just about how much other people are charging for the same (or similar) product you want to sell. It’s also about ascertaining just how much your customers are willing to spend on that product. This is another reason why carrying out pricing research is so crucial when you are pricing your products and introducing new ones.
By looking at what other people are charging and combining that with the information you can get about what your specific target market is willing to pay (or is able to pay – there might be a difference between the two ideas), you can ensure that you don’t price people out who would otherwise have bought from you but that you make a profit at the same time. This latter point is very important because as much as you might want to sell plenty of products unless you make a profit, it won’t be helpful to your business at all.
Execute Price Increases
Although you will want to avoid it when it’s not necessary, sometimes you will need to put your prices up. If you have to spend more on products or the materials to make them, or other expenses within your business have increased, and you need to put your prices up to pay for them, it’s something you should definitely do.
However, what you don’t want to do is upset your customers, which is why incremental price increases can be a good idea. Another good idea is to carry out pricing research because if you can see that others are charging more, you can put your prices up to match them (or still be below them if you can), and your customers won’t have an issue.