Yet for many B2B marketers, the pricing strategy in their marketing plan is challenging to write; many aren’t even involved in creating their pricing strategy. There are many factors to consider when developing your pricing strategy, both short- and long-term.
Note: You can access guided pricing strategy templates and step-by-step instructions for writing the pricing strategy section of your marketing plan in our marketing planning and management app. When you offer a truly unique product or service with little direct competition, it can be challenging to establish your price. When your price, value proposition and positioning are aligned, you’re in the best situation to maximize revenue and profits. Company C regularly evaluates their competitors’ prices to make sure they’re delivering on their promise. However, if there isn’t a strong market for prestige, this strategy may be the best one for the company long-term.
If Company B charges a premium price for an average product, they’ll have a very difficult time generating interest in their it. Yet Company B may be able to implement a small price increase to raise revenue and profits; it depends how much more its customers are willing to spend. By analyzing price sensitivity and testing different prices, they can evaluate the strength and potential of this new strategy. If Company C’s prices rise in relation to those of their competitors, sales will plummet – their market is shopping on price, not factors like product leadership or customer intimacy. If Company C cannot maintain its operational efficiency and cost leadership, it will need to develop new products or markets for its existing product. Their pricing is typically 15% above the competition – they’re the most expensive product in their class. Their demand curve is relatively inelastic, meaning that their market isn’t that sensitive to price.
Much of that results from the carefully selected positioning and branding over the past five years. When they’re behind their sales targets, individual reps are given the green light to discount if needed to meet their sales quotas. Management doesn’t want to get in a price war, but is willing to ensure that they hit their short-term numbers. Management knows that they could spend more in R&D to differentiate their offering and have greater pricing power, but they haven’t yet committed the budget to do so.
The quality of their offering suffers, and they end up providing mediocre service for both markets.
By lowering the price of their “prestige” brand to access a new market, Company C has increased its revenue, while reducing its profit margin and damaging its brand. Create a free account in our marketing planning and management web app for step-by-step guidance. It’s best to define your positioning, create your brand strategy, and identify your distribution channels before you develop your pricing strategy in the marketing plan. For example, if your method for delivering value is product leadership, you shouldn’t discount heavily or compete on price; you should also minimize pricing conflicts with any channel partners. Your price sends a strong message to your market – it needs to be consistent with the value you’re delivering.
If your value proposition is operational efficiency, then your price needs to be extremely competitive.
If your value proposition is product leadership or customer intimacy, a low price sends the wrong message.
Estimate how sensitive your customers are to fluctuations – it will help you determine the right price and volume combination. Once you’ve finalized your pricing strategy in the marketing plan, it’s time to design your marketing campaigns.

The Marketing MO planning app is your behind-the-scenes Chief Marketing Officer, a comprehensive resource that will improve your overall business, whether it’s a consulting practice, start up, or mid-size company.
Setting up additional price points for your offer is one of the most effective pricing strategy in marketing. If you know your prospect will compare your price to something else – give them that something else. You again advertise your standard room, but this time you show both of your offers: standard and deluxe.
By adding one seemingly useless price point (option 2), The Economist boosted the perceived value of option 3. Choosing option 3 in the presence of option 2 allows people to feel smart and canny, because they figured out which option is actually the best.
A great psychologist and economist Dan Ariely describes this example his amazing (and one of my personal favorites) book, Predictably Irrational.
What having an additional option (even if it seems useless) really does, is that it makes us feel like we are great decision makers. One point as a counter though, you might not want to provide too many choices and that is a fine art according to me..
You are very right :) This technique will work if we have 1 main offer to sell and we add another one around it. There are multiple approaches to pricing of information technology products and services.  Although pricing strategies differ based on whether the software or system is getting sold as a product or getting leased as a service, there are certain basic generic strategies for pricing the same.
Cost-based pricing of technology is historically the most popular method since it relies on more readily available information from the cost-accounting system. The problems of a cost-driven pricing strategy arise from the assumptions that must be made about product costs.
Another pricing strategy for software products and services is based on Function Point analysis and Full Function point analysis. A few other pricing techniques are  MIPS-based pricing, tiered pricing, user based pricing, flat pricing and usage based pricing. In a MIPS-based pricing strategy, software prices are based on the on the theoretical throughput of the system (MIPS) on which the software is running.
In a flat pricing contract, customers pay a fixed price for unlimited use of the software product. In an user based pricing strategy, the customer is charged based on the number of users that utilize a collection of software features over a given period of time by assigning costs to a particular number of users or workstations and sum up individual cost allocation. In an usage based pricing strategy, customers is charged by the vendor firm only for what they actually use on a transaction basis, during a contract period, say in months, but more popularly for larger IT firms and engagements, in years. Today another popular pricing technique is based on the economic value that a client firm may get from a technology product or service level agreement. However, which pricing strategy to deploy and at what stage is entirely dependent on multiple factors like whether it is a service level agreement or not, whether it is a product or not, whether it is being licensed as a technology platform to another implementer or not, which stage of the product life cycle is it into, what is its competitive scenario, what is the industry structure of the product or the nature of the industry where it will get implemented (say automobile vs telecom), is it entering a new market or an established one, etc etc. Learn how to set up, manage and improve your distribution channels with this detailed how-to guide from the experts at Marketing MO. Their consultants come from top schools, and they work with Fortune 100 clients to implement complex, large-scale projects.
Their clients are buying the best expertise they can find, and they’re less sensitive to price because they care most about getting top talent. There’s a lot of competition and their product is only slightly better than the alternatives.
They regularly review the market, run promotions, and adjust prices to maintain their competitive position.
Their value proposition is operational excellence and they consistently deliver the same product at a better price. They hire more consultants, but since they’re charging less per hour, they can’t afford the same top-tier talent.

By doing so, you’ll ensure that your pricing reflects your value and reinforces your brand. If you’re perceived as a commodity, you must either change the market’s perception via a new positioning strategy, or compete on price and focus on innovating to keep costs low so you can still make a profit. You’ll be far more effective when considering discount promotions – you’ll know exactly how low you can go and still be profitable.
If your value proposition is operational efficiency, evaluate your competitors on a regular basis to ensure that you’re continually competitive.
When tackling any new marketing task, have confidence that we have your back – with the structure and detail you need to get things done right. Now whoever comes across your ad, will compare your offer to other offers they have seen – of different hotels. Now your prospects compare the standard room to the deluxe one – not the competition.
If you choose option 2, you get print-only subscription, whereas in option 3 – web and print. The threat with pricing your products or services low is that we turn our customers into bargain seekers. Since often, information technology post deployment is treated with Activity based costing, while developed in-house for many firms, a cost based pricing strategy becomes extremely lucrative to developers for the simplicity of development.
But then, one needs to consider the fact that unit costs are volume dependent while fixed cost per unit is allocated such that it varies with projected volume. Function Point Analysis is one of the most popular techniques for pricing of technology.  Function Point Analysis has been proven as a reliable method for measuring the size of computer software in terms of Kilo Lines of Code (and more recently, Millions of Lines of Code), based on which and its complexity of development the software is priced. This approach enables customers to more easily predict what they will pay for the use of the software.
Our authors are educators from top QS ranked universities and practitioners from multinational enterprises. If they’re extremely sensitive, you may be better off at a much lower price with substantially greater volume.
You add another offer (deluxe) not to sell it, but to make a standard offer look like a very good deal.
We jeopardise the loyalty they might have had to our brand and turn them into customers who go for the best price rather than best value. If you have any more questions regarding setting additional price points for your pricing strategy, you can also leave your question below and I will get back to you. Cost of development of a software product is often calculated based on the COCOMO model or from the COCOMO – II model. The allocation procedures, be they direct labour hours, or some other surrogate metric, are not very precise. Function Point Analysis has been established as being extremely robust in estimating projects, managing change of scope of implemented engagements, measuring productivity, and communicating functional requirements. In a tiered pricing strategy, vendors attempt to package software benefits according to user requirements and their willingness to pay.
This is slowly becoming the most popular pricing strategies followed in research labs for emergent technologies, like that of IBM Research, Microsoft Research and SAP labs. By offering three options: S,M or L coffee they are increasing significantly the posbility of purchasing the L option.
Therefore, product costs are not too dependable and offer technology developers lower returns on their investments. This approach to pricing is an attempt to link software product costs to perceived customer value.

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