Pricing is a very important factor and can make or break a product. It is a key element of the marketing mix and should be spot on. There are two marketing strategies to price a product-price skimming and price penetration. Price skimming is a term for when a business charges a higher price than its competitor.
This can be beneficial if the business has high equity or the product has a USP which has allowed them to gain from a differential advantage in the market. Price penetration, on the other hand, is setting your prices lower than the competition to attract customers. Businesses using this strategy benefit from sales volume and not a high profit margin.
Managing your price effectively
Pricing is where a good setup business can go wrong, so it is vital to manage it carefully. The first and foremost step is knowing your expenses and then deciding how you want to price your product. The price of the product directly reflects the overall goal of the business. If the goal is profit maximization, you go ahead and price your products as high as realistically possible. On the contrary, if the business is in the initial stages trying to work their way up, they would want the goal of the business to be maximum sales.
This can be done by decreasing the prices and attracting customers to buy the product. This will offer a business word of mouth advertising and will show their presence in the market.
A skincare product is not a single-use product. Returning customers are guaranteed if they get a good value of money. Since the skin is a very sensitive part of our body, and customers prefer quality over anything when looking for a skincare product, you would not want to price your product super low compared to the competitors.
This will raise many questions and doubts regarding the quality when they see a significant difference in the price tag of an existing company and a new entrant in the market. On the contrary, it is very easy to differentiate your product if you are selling a skincare product.
Small additions such as extra minerals or vitamins can offer you a competitive advantage in the market due to value addition. Additionally, packaging of the skincare products can be made appealing to further gain an advantage since appearances are important when selling such a product.
Furthermore, people nowadays are very careful regarding the ethics of the business so make sure the product does not contain any substance which can be harmful towards the environment and nature such as plastic or animal skin or fat which is often used in skincare products. This can be used as an advertising factor and can attract the environmentalists out there which can allow the business to charge a higher price.