Following the right pricing strategy is the key to run a successful wholesale business. You can find the right price for your products by keeping a balance between your sales volume and profitability.
If you keep your products’ prices too high, you may risk not being competitive enough and driving your customers away. If you keep your products’ prices too low, you may damage your product’s value and lose profits.
It can be quite challenging for wholesalers to set the right price for their products, which is why we have compiled the top five pricing techniques to help you with your wholesale business.
But before moving to price techniques, let’s understand what Pricing is.
What is the Pricing and What Factors Are Involved in Pricing Process?
Pricing can be defined as the process of setting a specific selling rate for your products and services. This process involves certain factors, including:
- The manufacturing cost of your products
- The wholesale marketplace
- The business brands
- The quality of your products
- The competition
Wholesale businesses should select a pricing technique to allow their best wholesale platform to grow and expand in the long term. The sustainability of your wholesale business depends on your choice of pricing technique.
List of Pricing Techniques for Wholesale Business
The following is the list of the best pricing techniques for wholesale businesses:
1. Demand Pricing
Demand Pricing is also known as Customer-Based Pricing, Dynamic Pricing, and Demand-Based Pricing. In this pricing technique, customers’ demand for a product or service is the main element for setting that product’s price.
You can use the technique of demand pricing in the following ways:
This pricing technique is used by most companies these days. a minimalist change in price can make a huge difference for customers. For instance, a customer may find a product of $29.99 much cheaper than a product worth $30.
It is also called skim-the-cream Pricing. This pricing technique is used by businesses who enter the market with a new product. They keep their product’s price high to earn profits. Customers happily pay the asked price due to the lack of similar products in the market.
Bundle pricing is used by grouping several products in a bundle and setting a price lower than if the products are sold individually. Most wholesalers use this pricing technique when they want to clear their inventory or get rid of overstock.
This pricing technique involves setting a lower price of your products than the market to attract new customers. The purpose of this pricing technique is to keep your customers from buying from your competitors.
2. Economy Pricing
The economy pricing technique is most popular with wholesalers and retailers. It is a basic pricing technique that involves low-cost marketing of your products. the purpose of this pricing technique is to target a specific price-sensitive segment of the market.
3. Cost-Plus Pricing
The cost-plus pricing technique includes the following steps for setting the price of your products:
- The cost of the raw materials
- The cost of production
- Overhead cost
- Markup percentage or Profit margin
By adding all the above costs, you will get a cost-plus price of your product. If you calculate all the costs accurately, you will always get a profitable product price.
4. Competitive Pricing
Competitive Pricing is also known as Strategic Pricing. In this pricing technique, you set your product’s price in comparison with products by other companies. In other words, you set your product’s price a little lower or higher than your competitor’s.
5. Geographical Pricing
Geographical Pricing is all about setting the price of your products according to your customer’s location. It means that different prices will be charged at different locations for the same product. Geographical pricing technique can be used in many ways, such as:
Point of Production Pricing
Point of production or Free On-Board pricing is about setting the price of your product according to its production location. This technique saves the wholesalers from paying freight or transportation costs.
Uniform Delivery Pricing
This pricing technique is all about setting the price of your products following the price for mail services.
Zone pricing is used in cases of long-distance customers. The price of your product will increase with the distance to your customer.
Freight Absorption Pricing
This pricing technique is opposite to the point of product pricing. In this method, you set your product’s price by adding all costs associated with transporting your product to the customer.
In A Nutshell
Pricing can be the determining factor for the success or failure of your wholesale business. That is why keeping the right prices for your products with a good pricing technique is crucial. We hope that the list mentioned above will help you select the right pricing technique for your wholesale products.