Pricing is a very important aspect of any business. Without the right prices, your marketing strategy won’t reach its full potential. The prices of your products and services determine how much revenue you get, your customer base, and your brand’s reputation in the marketplace. The wrong pricing strategy will see you up and out of wholesale business before you know what went wrong. Before you start your wholesale business or launch a new product on the market, you need to determine your pricing strategy.
Long-Term vs. Short-Term Pricing Strategies
With your business and the products and services you are launching, would you need a long-term pricing strategy or a short-term pricing strategy? Picking a long-term pricing strategy has to be dependent on your goals and targets for your wholesale business. A long-term pricing strategy should be well-planned and properly put in place to encourage customer growth. It can also help increase revenue and profits, and to establish your brand as one of the best in the market.
Your pricing strategies have to go hand in hand with your plan strategies. You can have a short-term plan strategy or a long-term plan strategy. You cannot use short-term plans on a long-term pricing strategy, and vice versa.
Short-Term Pricing Strategies
Short-term strategies are detailed accounts of how the marketing mix: product, distribution, price and promotions, will be managed over the defined period of time. This is, most commonly, a year. It could range anywhere from a quarter of a year or even a month, in some cases.
If a price increase is required to compensate for increased production costs, the timing of the price increase along with marketing initiatives. This is to aid in reducing anticipated trade and consumer friction against the price increase are included in the marketing plan.
Basically, short-term strategies are some kinds of “calendars of events”. They detail marketing activities on a monthly basis over a period of 12 months. They also include supporting monthly sales forecasts and marketing budgets.
Long-Term Pricing Strategies
Long-term strategic marketing plans are created to establish longer-term marketing strategies against a backdrop of uncertainties relating to future economic, consumer, industry and competitive trends. Many industries need strategic marketing plans because of prolonged lead times to develop and introduce new products.
Cases like this are prevalent for new product development in the pharmaceutical and defence industries. This is an industry where products can be in development for up to 10 years before they are launched onto the market. All businesses can benefit from strategic marketing planning because marketing is about creating the future. You need the vision to create the future. Long-term planning opens the window, the vision, into the future. This enables you to use your long-term pricing strategies optimally.
This long-term pricing strategy is used by businesses to emphasise superior product benefits or high-quality services. The aim of premium pricing is to set up and maintain a high price position. This is to send a message that those products or services are of top quality. With this strategy, you can maintain a regular price point during the introduction, growth, and early maturity stages of the product cycle. When you are about to phase out that product or service, or about to introduce a new product or the product has entered the last stage of the product cycle, you can set lower prices for it so as to sell out inventory.
This long-term pricing strategy is where prices are set based on the target market’s perceptions of the value of that product or service, as compared to the prices of competing brands. If your customers think that your product’s or service’s price is fair at a certain amount, then you should price that product at that amount or near it. It is important to carry out some market research before launching a product or service. Make sure to monitor changes in the market and customer demand based on the availability of products and services. Including declining interests in your products and services over time. Customer perception values may fall, due to the release of an advanced product or a newer, cheaper version.
This long-term pricing strategy uses cost-plus pricing and target return pricing to determine long-term profit maximisation for your business. Basically, profitability involves setting prices of products and services based on the level of profits you plan to get over a certain period of time. You need to plan how long the initial demand for your new product or service will last for you to attain higher profit percentages. You also need to factor in the possibility of selling off inventory at little or no profit when the products or services enter their last stages of the product cycle.
Penetration And Skimming
These long-term pricing strategies have their main focus on how you enter the market in the early stages of the product cycle. Whether is it starting a new business, or launching a new product or service, how you enter the market matters. Penetration is the pricing method where you launch your products at low prices. Then gradually move your prices higher and maintain a regular price range over time. Skimming is the marketing strategy where you launch your products on the market at premium prices. You maintain this till you have exhausted the market for the product or service. You then reduce the prices gradually to target the moderate customers.
As a wholesaler, you need to know these long-term pricing strategies and be ready to implement them if you want your business to grow and last long enough to make great profits. Set goals that are in line with your long-term plans. This will aid you in using your long-term pricing strategies.