Customized pricing refers to altering the price of goods or services based on customer factors. This is a strategy used by some organizations to appeal to the consumer by offering a low price based on their particular circumstances while also making a profit. This requires accurate studies of consumer demographics and detailed knowledge of market conditions, so customized pricing is usually only seen in a limited number of industries.
There are many different ways to customize prices. If you are looking for a common method, then try starting at a base price but increasing this price by offering additions that consumers can choose from. You can do this most easily if you are selling vehicles, computers or another type of product where there are multiple options to add extra feature.
More complicated versions factor in data beyond the consumer’s control, such as where the consumer lives and what their income level is. If you are lending or creating a bank loan strategy, then you can easily incorporate customized pricing, which calculates in the borrower’s financial status, which can change from borrower to borrower. If you are selling more tangle products like gasoline, look into creating a method of customized pricing that factors in how expensive transport costs are and how high the demand for the product is in your area.
There are also online-based pricing strategies known as dynamic pricing, which include auctions and name-your-own-price systems that allow consumers to be in charge of how much they pay for a particular item. In these circumstances, you will need to add an option that allows consumers to pull out if they feel the price is too high.
If you are in charge of pricing for a traditional market, such as a department store, you may be interested in trying a micro-marketing technique. In micromarketing, product prices are changed from store to store based on a variety of factors including local demand, competitors, and simultaneous promotions. Most department chains keep their formulas closely guarded, however, so you will need to form your own based on factors that are important to you.
Your goal when customizing prices is to increasing profit margins as much as possible from product to product. If you do not have enough data to make these decisions, it can be very difficult to adjust prices while still holding onto your marketing and increasing net income. You may want to consider hiring an accountant or professional consultant to develop a formula for you that will take into account necessary variables. Also be aware that it is difficult to always know what price consumers will accept, especially if they know that lower prices are being offered in other areas simply because of different marketing conditions.
You may find your customized pricing strategy also makes competition much more difficult. If competitors are not using customized pricing as well, then they can offer lower prices than you and take away market share as consumers naturally gravitate toward better deals not tailored to them. Your strategy will be most effective when it allows you to offer lower prices to consumers while still maintaining your profit margin. This makes customized pricing ideal if you have a service-based business, such as an insurance company.