Businesses can use creative pricing strategies to maximize revenue. Especially in challenging economic times, creative pricing strategies may help you to increase profit while your competitors suffer from revenue drops.
Next to the wide array of pricing strategies available, you may be interested to play with your pricing when times become difficult. Unfavourable economic climates may prompt you to consider creative pricing strategies. Creative is not to be understood as against the law, but you should be careful using them – creative pricing strategies can quickly lead to an alienation of customers if you charge more than what the customer feels is fair.
3 Examples of Creative Pricing Strategies
Variable pricing means charging more for an item at times of high demand. During demand peaks, you simply raise prices because the relation between supply and demand defines the price. Thus, it is actually one of the most basic and logical pricing strategies! In many businesses, variable pricing is commonly used. For instance you may notice that the cinema is more expensive in the evening, thus during times of peak demand. But also the local ice cream vendor may consider variable pricing. On a hot and sunny day, when suddenly everyone wants an ice cream, the ice vendor could raise the price. Especially, if his ice cream supply does not grow only because it is hot. He simply benefits from a shift in the relation of supply and demand – and maximizes his revenues.
Creative pricing strategies also include reverse pricing. Customers may reserve certain services or products and pay more for them – and if they do not show up, the business can still make money. This technique is used in cinemas and broadway theaters: they make more money on some seats. Cinemas and theaters allow customers to reserve a seat for a certain performance, but cancel at the last minute with no penalty. They also allow other customers to pay a reduced price for a “will-call” ticket. If the customer who reserved the seat ends up using it, the theater makes extra money. If that customer doesn’t use the seat and it goes to a will-call customer instead, the theater still has revenue. But the reserve pricing strategy can also be used by other types of businesses. For instance, a video rental store could charge more to reserve the latest releases ahead of time.
Promotional pricing means combining pricing with promotion. For instance, a coffee shop may offer a coffee card: every time a customer makes a purchase, the cashier marks that on the customer’s card. After ten stamps or punches, the customer gets a free coffee. But promotional pricing is one of the creative pricing strategies that can be applied in lots of different ways. Another form would be a price discount for customers who refer their friends and families. For instance, a car repair could reward referrals with a discount on the next repair, and a gym could offer two months for free for every referred friend. The customer benefits because he can save money, and the business benefits because of increased customer loyalty and new customers.
As we have seen, creative pricing strategies allow businesses to maximize revenues and profits. Especially in difficult economic times, when revenues decline, you should consider using creative pricing strategies to defend against a drop in demand, revenues, and profit.