Frequently asked questions

  • What is a pricing strategy and what are some examples of types of pricing strategy?

    A pricing strategy describes the method used to decide how much to charge for a product or service. There are a huge variety of pricing strategies. You might even want to use different strategies for different items across the same range.

    A full-cost pricing strategy takes into account all of the expenses incurred to create the product, before adding extra on top to ensure profit.

    A price-creaming strategy involves initially setting a high price for your product, before gradually lowering it over time. This approach works best for new products that don’t have many competitors to start with.

    A pay-as-you-choose strategy lets customers decide how much they want to pay, sometimes with a minimum amount. This method is best used when testing out something new before it’s properly launched.

  • Why is a pricing strategy important?

    Getting the right pricing strategy is an essential part of ensuring that your business maintains a healthy cash flow and stays profitable.

    Your pricing strategy can make all the difference in attracting customers. If the price is too high, you risk putting customers off. If the price is too low, you risk making your item appear low value.

    You’ll need to track your pricing strategy to make sure it’s working for your business. Square’s point–of-sale software can help you check how well a particular pricing strategy is working by linking your record of sales up to your Square dashboard.

  • What is the best pricing strategy?

    Different pricing strategies will work best for different products and scenarios. Indeed, there’s no one-size-fits all approach.

    For example, a premium pricing strategy might work best for a business whose customers expect luxury and quality. Pricing these kinds of products too low could turn potential buyers off as they may perceive them as being cheap.

    A loss leader pricing strategy, on the other hand, involves purposely pricing products too low to try to leverage sales off other, more profitable products.

    And a penetration pricing strategy works best for new businesses that want to quickly gain market share. This involves pricing products low to attract customers and put off potential competitors from entering the space.

  • How do you determine a price for your product?

    Even when you have decided on an appropriate pricing strategy, the pricing of individual products and services can still feel elusive. You want to leave your clientele with a sense of value for money while also ensuring that you have sufficient margins to operate comfortably.

    When determining the price of a product or service, it’s important to think about:

    • Its value — either the costs involved with sourcing/making a product or the time and expertise that a service demands

    • The fixed and variable business costs that need to be covered

    • The current spending power of the people within your target market

    • How your competitors currently price their products or services

Information at any stage.

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