Choosing The Correct Price Point While Selling

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Pricing products and services Marketers make use of different strategies to sell products & services. Clever marketers know there is no sense in going with the flow. They must do research and find strategies that work best for their products/ services

Price skimming is one of them. This tactic is used mostly while selling technological products. Software products that are at their initial stage of their product life cycle tend to have a high demand. The top segments of the consumers who are willing to pay a high price are skimmed off first. As and when the product tend to reach a plateau in sales, price is gradually trimmed.

What are the advantages of price skimming? The seller rakes in more revenue This tactic makes use of opportunities when buyers are willing to pay more for a newly launched product/ service that has innovative features. While price skimming it is important for the seller to highlight special values the product has.

It must be unique in the market having features that were not available before in similar products Examples include, new models of cars, mobiles, cameras, TVs, and refrigerators Sellers highlight why the new models are so special.

Price skimming involves some amount of risk because the target audience must accept that the price relates to its value

Some of the drawbacks of price skimming are: Lower sales volume – The high initial cost may be accepted by only a small section of buyers Competition – New players may enter the field challenging the claims of the seller that the product is unique. Competing companies may offer similar products / services at lower prices Customer avoidance – If the price is kept high for too long then consumers may decline to buy the product entirely

● Price skimming if done cleverly earns back investment in a short time ● Arriving at the best price point to maximize profits is not easy ● The merchant must know what the customers are willing to pay ● It is important that the product must match the claimed value advertised and promoted.

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