Creative Pricing Strategy

  

 Some people might feel “ripped-off” when they find out someone bought the same thing at a lower price, even though at first they were satisfied with their deal. For those who still prefer a traditional pricing policy – a price that is not changeable, and that is determined by certain elements such as cost, market equilibrium, and competition – different prices for each customer could mean they will get “ripped-off.” In contrast, from the view of practitioners of the new pricing strategy, this can be seen as a Creative Pricing Strategy.

  What is ‘Creative Pricing Strategy’

     Something creative refers to something new that has some kind of new value. Likewise, Creative Pricing Strategy represents a new pricing strategy that gives new value to both sellers and buyers. 

Creative Pricing Strategy grows business

     As the technology gap among competitors shrinks, product quality has become highly equalized. Therefore, quality is no longer an issue in deciding the value of a product. Because of that, marketing is more important now than ever. Different from other elements of marketing mix, price used to be recognized as something untouchable, so marketers didn’t even try to come up with creative pricing strategies. But traditional marketing methods are no longer effective since everyone puts strong efforts into the existing marketing strategy. Under this circumstance, Creative Pricing Strategy open up a blue ocean.      

        

Three major requirements to meet Creative Pricing Strategy

 

    First, be free from prejudices: prices shouldn’t necessarily be decided by traditionally recognized essential elements like cost, market equilibrium and competition. This doesn’t mean that those elements should be neglected. The best thing to do is consider those things, but do not follow existing policies, and try to create a new or transformed pricing strategy.

 

    Second, add value on price itself.  

‘Cost-plus pricing’, or ‘Competition-based pricing’ might be able to show the value of the product itself, but it fails to include real value surrounding the entire process of merchandizing. The concept of value is subjective. It can be created by a variety of things like technology, brand story and personal experience. So value-based pricing has incredible potential to be creative pricing strategy.

 

    Third, satisfy both sellers and buyers.

 The ultimate objectives for commerce are to bring profits to sellers and provide buyers with what they want. Unfortunately, however, sometimes some sellers choose to give up their margin to survive in fierce competition or try to rip off customers to earn immediate gains.

   Creative Pricing Strategy seeks happiness for both sides. This is possible because it creates new value to be shared between sellers and buyers. By enlarging the pie, both sides can be pleased without any loss from any side.

                                                                        

Examples of ‘Creative Pricing Strategy’

 

   Pay as much as you enjoy       

 

 

Hermann Bredehorst/Polaris, for

                           The New York Times

                                        

     How much would you pay if you were asked to pay as much as you enjoy for a service or product? Some people might want to take avantage of it and wouldn’t pay anything. If most customers were like that, no one would take this pricing policy into consideration for their business. There are some actual cases, however, that show the possibility of success with this strategy. A wine bar called Weinerei’ in Berlin serves a wide range of wines at value-based prices. After tasting any kind of wine you like, you just need to throw some money into a jar – any amount you think is fair. Since most people feel like paying the right value, this pricing policy doesn’t hurt their profit. Rather, it attracts more customers charmed by the unique, exciting new system.

  Free Service and Sponsorship

  

   It’s not easy for anyone to resist the temptation of free. Therefore, charming incentives like free coupons or gifts have been used to attract customers. This method can be developed: the concept of free can be used not only for incentives that require the customer to buy something first.

    A Japanese start-up business named ‘Tadacopy’ has offered free photocopies for university students. Obviously, this concept has been embraced by students, but this still leave curiosity about how the company make money. Their source of actual money is not from customers but from sponsors who want to advertise their services or products. Ads are printed on the back of the copy paper the students get for free. From this example, you can see that price doesn’t have to be determined based on the value of product itself.    

   

Future perspective of the ‘Creative Pricing Strategy’

 

    The potential of Creative Pricing Strategy is limitless, as long as it creates new value, and satisfies both sellers and buyers. Expanding the benefit to society and the environment, the Creative Pricing Strategy can be extended to Social Pricing. For example, eye glasses retailer Warby Parker has a special policy called ‘Buy a Pair, Give a Pair’ which means “for every pair of glasses you buy, we give a pair to someone in need.” Likewise, in the near future, businesses may not be able to become competitive without considering the value it shares with customers and even society as well.        

     

References

  Economics of Price – Sung-gi Joe

  http://http://www.springwise.com/

  http://travel.nytimes.com/