Main Benefits of The Pricing Strategy Matrix
The Pricing Strategy Matrix helps you: determine the optimum price for a product or service by examining price and quality while undermining 4 potential strategic options.
- Choose the best price for a product or service
- Gain market share through an optimal pricing strategy
- Disrupt the competition and increase sales
Explanation of The Pricing Strategy Matrix
It is a strategy matrix consisting of 2 dimensions, namely price, and quality, that facilitates the choosing the best price for a product or service. There are four strategies that are named according to their positions in the 2-dimensional model. These are Skimming, Premium, Economy, and Penetration.
1) Skimming
It is a strategy to apply an initially higher price compared to product quality. It is mainly used to attract many customers possible at a higher margin. A typical example is the strategy of game consoles during launch.
2) Premium Price Strategy
It refers to segmentation when a high-quality service/product is offered at a high price. A high-quality product is a must to sustain the high price level. An example of this strategy can be seen in Apple products.
3) Economy Price Strategy
It can be articulated as the opposite of the Premium Price Strategy. Both quality and price points are perceived as low. It prioritizes gaining rapid market share and disrupts the competition in the market. The strategy of budget airlines can be given as an example of this segmentation.
4) Penetration Strategy
It refers to a situation when the product/service quality is high whereas the price point is low. It is mainly leveraged during the market introduction period to increase sales. A pricing strategy of a special launch offer can be an example.
How to Apply the Pricing Strategy Matrix
Analyze your position in the market and offer a range of starting points to discuss a strategy using Bowman’s Strategy Clock.
Respond to the market demand. Use Break-Even Analysis, The ADL Matrix, GE – McKinsey Matrix, and Price Sensitivity Meter to assess the economic feasibility of your innovation and scale up quickly.
Innovate a new business model that will help your company gain new customers use the Blue Ocean Strategy
Additional Tips and Readings
- Lafley And Martin’s Five-Step Strategy Model to craft a well-thought business strategy.
- To formulate and execute your business strategy via 7 Strategy Questions.
- To help you build a resilient competition strategy for your company use GAME THEORY.
Contact us to set the best price for your product via the pricing strategy matrix.
