- February 5, 2020
- Posted by: target
- Category: Blogs
Maximize Market Share with the Right Combination of Pricing and Cost-Reduction Techniques
Setting the right prices for your services and products can be tough. Set the price too high, you miss out on important sales. Set the price too low, you miss out on important revenue. Pricing doesn’t have to be a sacrifice or a random decision. There are dozens of ways to set the right pricing models and strategies to help attract more customers and achieve your revenue goals.
Pricing
Derived best price is usually a calculative figure of total costs and margins.
Landing Cost + Expected Profits = Price
Total Costs include research and development, production costs, packaging, advertising, taxes, duties, sales costs, insurance, transportation, spillage, and spoilage, etc. The pricing depends on the type of product/service you offer, their demand, and customer reach.
Combination of Pricing, Cost Reduction and Market Share
Cost-Reduction has a direct and proportionate relation with the final price at which it reaches the end customer. The short term and long-term costs play a vital role in this. Cost-reduction is not as and when possible but needs to become part of your business strategy and structure to help you gain an advantage over your competitors.
Focus on what is the trouble area and consider it as your priority in terms of planning for cost reduction. Cost control and reduction in identified areas will increase profits. It may be centralized or decentralized approach at certain junctures and in specific areas, according to the need of business.
Ways to reduce cost in the manufacturing industry
- If the raw material costs are high, find optional suppliers.
- If the transportation costs are high, switch to better and less expensive channel partners.
- If production cost is high, search for other manufacturers who can manufacture your products at lower costs.
- If your advertising costs are high and not yielding expected results, change your advertising techniques and mediums.
- If the quality of the products is the reason for high price, survey the quality quotient and adjust the price with the quality expected by customers.
- If demand is less, it’s time for thorough market research.
- Train your employees for improved productivity and reduced costs.
- Make use of tools available for monitoring the quality of production and automation for increasing the volume of production.
Ways to reduce cost in the service industry
- If the services you provide are easily replaceable, innovate in defined cost brackets. Innovation attracts customers, increases business control costs.
- Automation in the service industry is a time saver. Use appropriate software to ease reaching out to customers and the prospects.
- If the delivery cost of service is high, think of different channel/business partners. Eg. recruitment partner, consultant, commission agents etc.
- If employment costs are high, go for multitasking and identify employees who can contribute to the organizational growth and lower costs by multi-functioning. The resource pyramid optimization entrusts responsibility making people accountable at their own and mid-level management to save the time of higher management. No wonder people say, ‘time is money.’
- Train your employees to mould them according to the need of your business, enroll them in what is possible with joint efforts of the team. Growth of the team members will attract new business and help maintain high service quality. ‘Better Services Reduce Costs.’
- Improved internal and external communication will save efforts, time and money.
- Make use of tools available for monitoring the quality of service you provide, missed opportunities, regained customer, lost customer, employee growth, cost vs. returns ratio of each department. These reports are for planning the shift required in the mindset of each member of the organization for being cost-conscious and initiating efforts for cost reduction.
- If the quality of service is the reason for high price, survey the quality quotient and adjust the price with the quality expected by customers.
- If your advertising costs are high and not yielding expected results change them.
- Find optional methods to get referrals to reduce customer acquisition costs.
- If demand is less, it calls for market research. Change the work pattern or sharpen the skills. Initially, this will increase costs leading to a reduction in the long term by increased business.
- Reward responsible spending and cost saving of any team member to build the culture in the organization.
Market share will increase if you deliver what your customers are expecting. Customers get attracted by innovation in product promotion, distribution, packaging, customer experience and satisfaction. Shifting to your competitor’s products won’t take time if you don’t deliver a product with acceptable quality and price. So price your products and services smartly.