Pricing strategy involves determining the best price for a product or service to maximize profitability, taking into account factors such as market demand, competition, production costs, and target audience. A well-designed pricing strategy balances the perceived value of the product with the customer's willingness to pay, positioning the product competitively in the marketplace and supporting the company's broader business goals.
The process starts with understanding the market and the customer. This includes conducting market research to analyze customer segments, their buying behavior and their price sensitivity. Understanding what customers value most in a product or service helps determine a price that reflects that value. For example, a premium product targeting high-end consumers might command a higher price, while a product aimed at budget-conscious customers would need a more competitive price point.