Pricing strategies
According to Eric Dolansky, customers’ willingness to pay for certain commodities has little significance as compared to their opinion on the value of the commodity there are purchasing. Therefore, it is very important for a business owner to consider greatly on how much the customer is willing to pay for your product rather than just adding a mark-up to your costs to give your product a price. For instance, considering the case of Stewart’s shoe shop market decline may be due to the pricing strategies he uses. The shop faces stiff competition from eBay, Amazon, and local discounters. It is therefore important for the shop to consider new pricing strategies such as value-based pricing, penetration pricing, and competitive pricing.
The first and best strategy Avery should suggest to Stewart is the value-based strategy. Stewart should first spot a product that is similar to theirs and evaluate how much the customer pays for that product. In this case, he should make a research on the prices of his competitors and analyze whether the customers are comfortable with the prices He (et al., 2016). He should then ensure that he demonstrate his prices to customer to evaluate their opinions. The second pricing strategy is penetration pricing. Stewart should first lower his prices to attract many customers. He can then raise the prices after attracting loyal customers (“The 5 most common pricing strategies”, 2020). Thirdly, Stewart should consider setting prices for his shoes based on the prices from his local discounters. In this way, he ensures that loyal customers purchase shoes from his shop since all the prices are the same.
Additionally, there are other pricing strategies that Avery can add to help Stewart’s shop regain market share. These strategies include cost-price pricing and price skimming. With price skimming, Steward should revolve on market prices, that is, raise prices when the demand for shoes is high and lower the prices when the demand is low (Giri., 2020). This strategy the shop survives in the market and hence attracting loyal customers. Another strategy to consider is cost-plus. He should set the value for his shoes by adding just a simple mark-up to the cost to avoid losses. All the above strategies will greatly help Stewart’s market regain market shares.
References
The 5 most common pricing strategies. BDC. (2020). Retrieved 21 July 2020, from https://www.bdc.ca/en/articles-tools/marketing-sales-export/marketing/pages/pricing-5-common-strategies.aspx.
He, Z., Cheng, T. C. E., Dong, J., & Wang, S. (2016). Evolutionary location and pricing strategies for service merchants in competitive O2O markets. European Journal of Operational Research, 254(2), 595-609.
Giri, R. N., Mondal, S. K., & Maiti, M. (2020). Bundle pricing strategies for two complementary products with different channel powers. Annals of Operations Research, 287(2), 701-725.