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Unless you’ve learnt the tips and tactics required to manage prices in an inflation-troubled economy, you’re probably wondering what a pricing strategy means in this context. What follows is an explanation of 4 such strategies. Here they are:
Cost-Plus Pricing
The point of cost-plus pricing is letting your product or service prices rise along with its cost of production. In practice, it entails summing up your production costs and adding a profit margin to arrive at your official price. This pricing strategy is relatively easy to implement. However, if you’re using it alone during a high inflation period, your customers may find your prices less attractive compared to what your competitors are offering.Competitive Pricing
In this case, you’re basing your prices on what’s quoted by others in your line of business. You could either try to offer prices that are less than or equal to the prevailing average unit price of your product type. Your aim here is to outcompete your rivals in terms of pricing so that people who are looking for a fair deal will identify your business as a go-to for this. The difficult part of this strategy is keeping up with constantly changing market prices, as is often experienced in high-inflation economies.Sign up for the Connect Nigeria daily newsletter
Key Value Item Pricing
Here, you draw in customers to your business by presenting them with discounts on popular products. When they accept this offer, you may then sell them other products at marked-up prices, in addition to the popular ones. In essence, you’d be using lower prices for popular products (value items) as an attractor, and higher prices for additional sales (‘profit margin items’) to make your profit. It’s a smart way to win over customers with cheaper pricing, while not sacrificing your profitability.Surge Pricing
Also known as dynamic pricing, this approach involves setting flexible prices based on current market demand. You raise prices during periods of peak demand and lower them when demand falls. This method works well for products or services that experience varying levels of demand across days, months, or seasons. They allow businesses to maximize profits at peak periods while also encouraging customers to spread out their demand over longer periods.Register to attend the CN Business Mixer
Final Words
The four pricing strategies discussed here can help businesses to remain competitive during periods of high inflation. As a business owner, you could combine some of these methods to achieve the best results with your prices.Got a suggestion? Contact us: editor@connectnigeria.com