What is Strategic Pricing?

Strategic pricing sets a product's price based on the product's value to the customer, or on competitive strategy, rather than on the cost of production.

This approach recognizes that people often make purchasing decisions based more on psychology than on logic, and that what is most valuable to the customer may not be what's most expensive to produce.

By creating strategic pricing policies, analytics, and processes, you can directly capture customer value and turn that value into shareholder value.

Significance of Strategic Pricing

What customers are willing to pay for a product may be vastly more, or less, than a company would charge if it simply priced based on cost.

Discovering what consumers value about your product can allow a company to increase its price – or, alternatively, might even suggest that a new product has no chance of being profitable.

Tips for Strategic Pricing

1. Strategic pricing is a marketing decision, which means it should be informed by dialogue with your customers.
2. Keeping a close eye on your competitors is important, but remember they are not the ones purchasing your product, and they may be making mistakes in their own pricing.
3. Recognize what your customers value and charge them accordingly rather than going head to head on price with competitors.

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