Suppose you ask any executive how pricing policies are likely to affect the demand for a service or product in the market. In that case, you will get a well-reasoned and confident answer. But if you ask them about how pricing policy will affect the consumption at the consumer end, you are likely to receive a muted response. It is common to see managers focusing only on profits instead of consumption while setting up product prices, leading to significant losses in the long run.
It would be best to keep in mind so many things while setting up a product or service price. But the psychology of consumption is the most helpful parameter; however, it is often ignored. Here we have listed a few details about why consumption is the most critical aspect of the sustainability of your business and how pricing is going to affect this. We have also provided some ideas from the experts at Global Investment Strategies to help you deal with this trade-off.
Psychology of consumption
The first step to building a solid connection with the consumers is to present the products they have already purchased. Depending upon the type of product, research shows that consumers will repeat the purchase after a few months or a year. This repeated purchase is more important if running a subscription-based service and product, including long-term profitability. Moreover, consumption is also essential for businesses that rely on customer satisfaction to ensure repeat sales.
Cost is the main driving factor behind consumption. When consumers feel that they are getting services worth the amount paid, they are likely to invest in the future. But if they get some other deal from your competitors at a lesser price, they may move away. Therefore, companies need to be very careful with charging and when to raise prices for their products and services.
Putting pricing and consumption together
Experts advise companies to pay close attention to their pricing policies and focus on increased consumption with their pricing decisions. It may not sound realistic and intelligent. But companies that fail to restructure their niche pricing model are likely to experience tough times. Managers need to pay more attention to the market conditions and follow a proactive approach to achieve desired outcomes. It may be offering additional offers to the customers or presenting them with reliable installment-based deals for smooth management of finances.
One of the best ideas can be to establish a psychological link between payments and benefits. You can unbundle some special offers to enhance the consumption of the product or service. I prefer to use reliable tools and tactics to present new proposals to the audience. It should serve their interests and preferences. You can attract their attention via social media tools by offering the most relevant niche to their needs. It will first require you to learn more about your target audience so that you can find some legitimate ways to serve them.