9. Value pricing
If you notice that sales are declining because of external factors, you may want to consider a value pricing strategy. Value pricing occurs when external factors, like a sharp increase in competition or a recession, force the small business to provide value to its customers to maintain sales.
This pricing strategy works because customers feel as though they are receiving excellent “value” for the good or service. The approach recognises that customers don’t care how much a product costs a company to make, so long as the consumer feels they’re getting excellent value by purchasing it.
This pricing strategy could cut into the bottom line, but businesses may find it beneficial to receive “some” profit rather than no profit. An example of value pricing is seen in the fashion industry. A company may produce a product line of high-end dresses that they sell for $1,000. They then make umbrellas that they sell for $100.
The umbrellas may cost more than the dresses to make. However, the dresses are set at a higher price point because customers feel as though they are receiving much better value for the product. Would you pay $1,000 for an umbrella? Probably not. Thus, external factors like customer perceptions force the value pricing strategy.