Wholesale pricing strategies are a crucial part of marketing. Businesses selling bulk products need to effectively select the ideal pricing strategies that will enable them to grow and expand in the long term. Always remember that how you price your products and services can determine if your wholesale business will stay open or flop due to low returns and possible bankruptcy.
As one of the biggest challenges for any business is choosing what type of wholesale pricing strategy to use, we made a list that can help you decide. Carefully read each item and see if it will complement your business.
Types Of Wholesale Pricing Strategies
There are different types of pricing strategies you can use in wholesale marketing. The list is rather long, but it will be outlined and described for you to see what wholesale pricing strategies would work best for your business.
Demand pricing
Demand pricing is also called demand-based pricing, or customer-based pricing. It is one of the wholesale pricing strategies that use consumer demand for a product or service as the main element of setting their price.
It is affected by consumer demand based on the perceived value of a product or service which includes price skimming, price point, bundle pricing, penetration pricing, and other pricing strategies.
The prices of products or services can increase due to bad weather, festive periods, or natural disasters leading to destruction. The price of a product or service increases as there is a likelihood that the price will also increase.
Competitive pricing
Competitive pricing, also known as strategic pricing, is a method that uses the prices set by other businesses or your direct competitors. This type of wholesale pricing strategy is compared with cost-plus or value-pricing where prices are based on other factors such as the demand for the product and production cost.
In setting the price, store owners either offer it above the competition, at the competition, or below their competitors.
Businesses that set their price above their competitors use a premium environment to justify the higher cost. On the other hand, wholesale vendors that opt for the same price as their rivals distinguish themselves from others through various marketing strategies.
Finally, those who set lower prices believe that added purchases from their other products can compensate for the minimal gain they had with the low-priced item.
Cost-plus pricing
Cost-plus pricing, also known as markup pricing, is a method wherein a fixed percentage is added to the cost to produce the item.
When setting the cost-plus price, you take the cost of the raw materials and the cost of production and add them to the overhead costs of a product or service.
Their total is added with a markup percentage or your profit margin. The result is your cost-plus price. Remember, as long as all the costs and sales have been accurately calculated, you will always run at a profit.
Penetration pricing
Penetration pricing uses low prices to enter a new market or to launch a new product or service. This strategy is used to entice customers to patronize a certain product or service.
It also serves as a deterrent to the competition to prevent them from entering the market with a similar product because they will have to make their prices lower.
Once a customer base has been established, you can subtly move your prices higher, to a moderate price for a longer-term strategy.
Price skimming
Price skimming is one of the wholesale pricing strategies wherein businesses initially offer a high-priced product to gain the most revenue. With this, they receive an immediate return on production costs and earn more before competitors come in.
As the need of the buyers are satisfied and rivals join the market, the business lowers the price to draw another set of price-conscious consumers.
This method is often used in introducing a new product for a short period. Once businesses make profits, the price of the item generally decreases as the demand lessens due to cheaper alternatives.
Economy pricing
Economy pricing is a basic, volume-based wholesale pricing strategy where items are priced-low and the revenue is based on the number of buyers. This method keeps the prices of goods low and targets sales at a particular segment of the market that is very price-sensitive.
This method is applied in the commodity goods market and is considered an efficient strategy for businesses with low overhead costs. Supermarket store brands, generic drugs, budget airlines, and more favor economy pricing as they earn through a large number of buyers daily.
Psychological pricing
Psychological pricing is one of the wholesale pricing strategies wherein price displays are set lower than a whole number. This is a common pricing technique used by businesses. A minor difference in prices is a huge difference for customers.
For example, an item whose price is listed as $399.98 may be seen as much cheaper than a product or service priced at $400.
Aside from lowering the price, other types of psychological pricing include store displays such as “1-day only sale”, “buy one get one free”, “50% off on your next pair”, and more.
Discount pricing
Discount pricing is a method of selling low-priced goods in large volumes. The original price of the item is reduced to increase demand, move inventory, and drive sales. Businesses utilize this strategy to lessen costs and stay competitive in the market.
This type of wholesale pricing strategy is divided into 4 types: quantity discounts, seasonal discounts, promotional discounts, and loss leaders. Quantity discounts are given for placing multiple orders. Some include loyalty cards bearing gift items based on the number of goods ordered.
Seasonal discounts are provided during off-peak times. They are also applied to improve sales during the start of peak seasons. On the other hand, promotional discounts are used to introduce new products. They are generally short-term but can drive sales.
Geographic pricing
Geographic pricing is where different prices are charged in different geographical locations or markets for the same product or service. The price difference is affected by certain factors such as shipping cost, tax set by the country the product will be distributed, and the amount consumers in the area are willing to pay.
Price bundling
Also known as product bundling, price bundling is used when two or more products or services are packaged together at a single price.
Product bundles come in two types: pure bundles and mixed bundles. Pure bundles are products or services sold only as a package. Mixed bundles on the other hand are items that can be bought as a pack or individually.
Conclusion
Whichever of the wholesale pricing strategies you choose for your business, consider first the cost used in making the products. It is essential that you are familiar with the cost of your merchandise to lessen the probability of losses.
If you want to experiment with which one works for you and which ones to discard, consider our tip: the cost-plus pricing strategy is more effective in a contractual agreement, while a demand-based pricing strategy may cause customer dissatisfaction and threaten your customer loyalty.
Also, if your business caters to both retail and wholesale items, it might be challenging to come up with different pricing strategies.
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Wholesale Suite is also created to seamlessly integrate with top WooCommerce extensions. Once installed, be more productive as you can: easily manage wholesale pricing across multiple levels by fixed price or percentage, control product visibility by user role, adhere to your country’s tax requirements, instruct wholesalers to utilize certain shipping gateways, and more.
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This is helpful
Yes
is any other pricing strategy is there in our market
Not yet ….. May be in future pricing technologies
Yes there are few more Pricing strategies in market and they are Premium Pricing, optional pricing,cost Based Pricing, product line pricing.
Easy language:) Thanks!
Do you have any suggestions on what type of pricing should we use for Renting Services or products?
Sorry Angela, rentals isn’t really my area of expertise, but you can probably try to apply many of the same principles above and adapt and test. Hope this helps!
Can you tell me which pricing strategy is best suited for retail wholesalers and b2b trading firm.
Hi, this is a pretty lucid writing about different pricing strategies in business.
So what would be the best pricing strategy for a new tech solution platform?
based on our business nature we can follow the pricing strategy which is suitable to us
Retailshops are stable
Insightful