Price is not necessarily the customer's first perception of a product, but it is the most sensitive part; therefore, to a certain extent, pricing is a strategy, and the price we set represents the product/service positioning we export to the outside world.
Before determining the preliminary price range, we need to conduct a comprehensive evaluation from the five perspectives of industry background, market research, competitors, product stage, and cost analysis .
1.1 Industry Background
The industry has a large background and country email list pre-determined influence on positioning and price. The popularity of products in the entire industry, industry tone, and user education all have a macro-level impact on product price and scope.
1.2 Market research
When I was studying politics, teachers would say that price refers to the value of a unit of goods or services, and its level is determined by market supply and demand.
Aside from theoretical knowledge, after all, it is the customer who ultimately pays for the product, so the customer's needs and the supply in the market will inevitably affect the transaction, which will also affect our pricing.
Here, we discuss the impact of market research on pricing into two perspectives: market supply and demand and customer perceived value.
1.2.1 Market supply and demand
The relationship between supply and demand refers to the relationship between the supply and demand of commodities under the conditions of commodity economy, and it is also the reflection of the relationship between production and consumption in the market.
In short, most of the demand in the market has stabilized in the short term. As the chart below shows, when production supply increases, demand decreases accordingly.
(Photo source Sequoia Hui)
Take badminton rackets as an example. Suppose there are 100 million people in China who need to buy badminton rackets. When the business has produced 500 million pieces, the supply exceeds the demand. The goods are hoarded, the demand is reduced, and the business loses the bargaining power; then, at this time, Its pricing is naturally difficult to maintain a reasonable state, and it can only be processed or destroyed at a low price.
1.2.2 Customer Perceived Value
Just now we looked at the relationship between supply and demand from the perspective of the group (market). Now we return to the individual (customer) to see how customers judge value?
The customer's perception of the value of a product or service is called customer-perceived value, which refers to the overall evaluation of the utility of the product or service after weighing the benefits that the customer can perceive with the cost of obtaining the product or service.
This theory makes us pay more attention to two points: one is the customer's perception of the value obtained, and the other is the customer's perception of the cost paid.
For example, now you are in a bad mood and need to buy a beer to relax; when you walk into a canteen, you are willing to spend up to 5 yuan on a bottle of beer, but when you walk into a bar, the same beer is sold for 50 yuan. You might be willing to pay for it.
This is related to the customer-perceived value we mentioned.
As shown in the figure below, when we think we feel the value of "drinking in a bar" is greater than 50 yuan, we will be willing to pay, that is, the value of the customer in the picture is higher than the product price; Going for a beer in an atmospheric setting makes us feel like we "earned".
Of course we know that a bottle of beer is only worth 5 bucks in the grocery store, but people are more willing to pay for the value they feel, not just the product itself.
For most startups in the Red Sea, the price of competitors' products is the most convenient and effective reference value. One is that competing products have gradually passed the test of the market and customers, and the rationality of their prices has been verified in a short period of time; the other is that people's judgments on the monetary value of commodities are very similar to sensory judgments such as weight, and it is difficult for us to accurately judge Therefore, there is an anchoring effect at this time, and the final decision needs to be made through price comparison.
The anchoring effect is affecting consumers' decision-making all the time, especially the prices of competitors' products, which are easily "targeted" by consumers to evaluate the price of our products.
Therefore, we must also take into account the price and style of competing products when pricing, and reflect our advantages over competing products when consumers anchor their choices.
1.4 Product Stage
We tend to divide the life cycle of a product into four stages: introduction, growth, maturity, and decline. Different product stages naturally have different pricing strategies.