Variable Pricing Strategy
A variable pricing strategy is a pricing strategy in which a company changes prices to match the demand for its product. Companies can increase their profits by using this method because they can stay competitive with their competitors and create higher revenues. The main objective of this pricing strategy is to increase the level of sales volume. To use this method, companies have to have a way to monitor changes in demand.
It makes sense to alter your pricing in the following scenarios:
To reflect external changes
For example, an increase or decrease in the cost of materials used to create your product or service can significantly impact your price. Even if you don’t plan on changing anything about your business’s operations, you should be aware of these changes and adjust your prices accordingly.
How you respond to these changes separates good business owners from bad ones. If all of your customers ask you, “When are you going to get new prices?” you need
to take action. If, however, only a portion of your customers are saying the same thing, then it might be best to ignore them and stick with your current prices instead. This change doesn’t always have to be overly dramatic or dramatic – a slight price adjustment can do wonders for your bottom line.
To increase customer loyalty and sales.
You might think raising prices will decrease revenue, but that is only sometimes true. A study by the University of Texas found that raising prices actually increased revenue in businesses selling products people perceived as having increasing value over time. If you are constantly lowering your costs and no one notices, it is time to raise them.
If you sell a service that is continually increasing in value, like web design, an increase in pricing will likely increase your revenue. If you constantly lose customers because the value of your offer doesn’t match the price they are paying, it might be time to raise prices.
According to Jordan Sudberg, “Price discrimination is the practice of selling the same good at different prices to different consumers, as a function of the consumer’s willingness or ability to pay.”
“With the growing prevalence of digital marketing, the need to keep up with creative changes and develop new strategies is a never-ending endeavor for businesses worldwide. The price increase would likely be slight, so things should be priced accordingly. People would most likely notice whether they want their supply increased or not when they are given an option. It might not seem like it, but a small price change can make a big difference.
Jordan Sudberg said a variable pricing strategy is a strategy in which a company changes prices to meet the demands of its products. With this method, companies increase profits because they can stay competitive with their competitors and create higher revenues.
It makes sense to alter your pricing if external changes occur, increase or decrease in the cost of materials used to create your product or service and if you want to reflect more considerable changes like inflation rates. For this effective method, all customers should be encouraged to provide feedback on pricing fluctuations to avoid making a drastic change that may or may not benefit them.