Pricing Strategies| Pricing Methods| Targetorate Consulting

Blog

How to get the right combination of pricing and cost-reduction efforts to maximize market share?

General and popular understanding of customers is price and quality, go hand in hand which is questionable as companies define pricing using various formulas. Prices, quality and many other factors affect the market share of a company.

Derived best price is usually a calculative figure of total costs and margins.

Price = Landing Cost + Expected Profits

Total Costs include the research and development, production costs, packaging, advertising, taxes, duties, sales costs, insurance, transportation, spillage and spoilage etc.

The tricky part is whether you need to reduce the bulk or retail price depends on the type of product /service and its reach.

Combination of Pricing, Cost Reduction and Market Share

Companies know there has to be a right price for each product’s sustainability. Market is full of variety of customers but what matters is who your current target audience is and who you are planning to include and thus attract in future.

Right combination of pricing and cost-reduction efforts is needed to increase the profits and market share of a company.

Cost-Reduction has direct and proportionate relation with the final price at which it reaches the end customer. The short term and long-term costs play vital role in this. Cost-Reduction is not as and when possible but needs to become part of your business strategy and structure for typical advantage over the 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 the profits. It may be centralized or decentralized approach at certain junctures and in specific areas, according to the need of business.

Tips for cost reduction for manufacturing industry
Tips for cost reduction for manufacturing industry
  • If the raw material costs are high deal with it finding optional suppliers.
  • If the transportation costs are high think of different 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 them.
  • If the quality of product 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 calls for market research.
  • Train the people for improved production and reduced costs.
  • Make use of tools available for monitoring the quality of production and automation for increasing the volumes of production.
Tips for cost reduction for service industry
  • If the services you provide are easily replaceable, innovate in defined cost brackets. Innovation attracts customers, increased business controls costs.
  • Automation is service industry is a time saver. Use appropriate software’s 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 search go for multitasking and staff members who can contribute to 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 time of higher management. No wonder people say time is money.
  • Train the people to mould them according to the need of your business, enroll them in what is possible with joint efforts of the team. Growth of team members will attract new business and help maintaining the service quality. “Better Service Reduced 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, number of missed opportunities, regained customer, lost customer, employee growth, cost vs. returns ratio of each department. These reports are for planning the shift required in mindset of each member of 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, say word of mouth publicity.
  • 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 reduction in 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 is expected in the price range and of acceptable quality. Customers get attracted by innovation in product promotion, distribution, packaging, customer experience and satisfaction, else shifting to the competitor’s products won’t take time.

Market expansion is not just business expansion over territories; it can be over demographics, geographic, cultural demands.

Impact on customer’s thought process and staying in demand is equally important for any business house to increase its market share. The concept of consulting partners has taken the world to surprise with the expertise and growth they bring in for the organization.

Creating impact is neither an easy job nor single handedly possible; we all have strong points and some weak characteristics of our personalities that affect the business and its growth. These consulting partners guide you to grab opportunities while they open the possibilities that are available largely to the experts in market.