3 Types of Pricing Strategies You Need to Know About
Fixing the right price for your product is no easy matter. Low prices are not always ideal because even if the sales flow is fast, the profits generated are not sufficient to grow your business. Likewise, when prices are too high, your sales flow will move slowly, potentially losing your customers.
There are many aspects that you need to pay attention to, starting from production and operational costs, revenue targets, prices for competitors’ products, and so on. You may also need to set a retail price and a wholesale price for each product. For all these aspects to be managed optimally, you need to implement a pricing strategy. Here are some pricing strategies that you can use as a reference.
1. Manufacturer Suggested Retail Price (MSRP)
MSRP is the retail price suggested by the manufacturer to be used as a reference when a retailer sells a product. Manufacturers use MSRP intending to help standardize the prices of various products at various locations and retailers. Retailers usually use this method for electronic products and gadgets.
- Pros: As a retailer, you don’t have to worry about pricing strategies and can save a lot of time just using this method.
- Cons: Retailers who use MSRP cannot compete in terms of price, because most retailers will sell these products at relatively the same price.
2. Keystone strategy
This strategy simply doubles the wholesale price of the product you are reselling. However, there are some conditions when you use this strategy, for example, the price is too high or too cheap.
If you have a product with a slow stock turnover ratio, large shipping and handling costs, unique or rare products, then the keystone strategy is not quite right. You may still need to increase the selling price of the product.
Meanwhile, if your product is easy to find elsewhere, using the keystone strategy will become more difficult, because products with fast stock turnover will usually not take too much profit, so you will lose the price competition.
- Pros: This strategy serves as a quick and simple rule of thumb, and can provide a decent profit margin.
- Cons: Cannot apply to all products, especially products that have fast stock turnover.
3. Price and Discount Penetration
It’s no secret that consumers love discounts, coupons, cashback, and various other types of markdowns. This is why discounting is the most popular pricing strategy across all business sectors, used by 97% of respondents in a study conducted by Software Advice.
- Pros: This strategy is effective for significantly increasing traffic, selling less-selling products, and attracting more price-conscious consumers.
- Cons: If used too often, this can give you a reputation as a cheap retailer, which will make it difficult for you to sell products at normal prices.
Meanwhile, price penetration is a suitable pricing strategy for new products. In principle, you temporarily sell the product below a fair price to introduce the product to gain market share.
That is the discussion about 3 kinds of pricing strategies that you need to know. For your business to grow, don’t forget to advertise through the Froggy Ads service, you can start by advertising your products, so that later you can increase visitors on your online business portal. Froggy Ads is an online advertising service that can help you control all your product campaigns. helps you target your desired marketing target and provides you with multiple options for marketing your product.