Reasonable Pricing on Smart Device — How to Match the Market
Pricing your smart home appliance, or, in other words, creating an efficient revenue model, is one of the key components of your business strategy. It determines the channels through which a company gets compensated for the resources that it spent on developing and promoting its product. At the same time, articulating a smart device price is more than just coming up with its monetary value that meets the market supply and demand.
In this article, we share some useful insights on how to decide on a reasonable price for a smart device that would match the market.
According to a recent report, around 60% of online shoppers make their final purchasing decision based on how well the product price reflects its value and features. What is more, nearly all shoppers spend a sufficient amount of time comparing the prices of devices that they plan to buy in order to ensure the best value for their money. That is why the price is an important factor that can influence your business model, relationships with customers and, in the long run, the position of your company on the market.
Modern smart home companies view pricing as a connected strategy that takes into account various factors from industry trends to customer preferences to market competition. Thus, being a part of this rapidly developing industry also means to challenge your company with unconventional approaches and models of smart device pricing.
The following steps will help you to come up with an effective pricing strategy for your appliance.
Face Your Competitor
One of the first steps in developing your revenue strategy is to understand how your competitors price their devices. There are many reliable websites which offer accurate pricing information and allow its users to search, analyse and compare the findings among each other. Collected data will effectively illustrate the most recent market patterns and pricing structures used by your immediate competitors. Advanced price tracking engines, such as Prisync, also offer a variety of useful functions and automated tools that can boost your product growth and give all necessary information about other connected electronic companies on the market.
Price Your Catalogue
Approaching your catalogue on a product-by-product basis can be a very advantageous strategy. Remember that pricing is a very flexible category, which allows you to raise or lower it based on your competitors’ politics and market dynamics. Moreover, IoT device price is often more sensible towards industry trends and tech innovations. It might be a good idea to regularly consult your sales managers and marketers in order to keep your smart device price up-to-date.
Do not underestimate the significance of a well-thought pricing strategy for your device’s revenue potential. Your final choice can depend on a number of factors, such as target audience, product positioning, marketing budget, company reputation, etc. Remember that each strategy serves its own purpose and works in certain business environments. Below we will describe four most widespread strategies used by smart home companies.
Prestige pricing model is used when a company wants to set a higher price than its competitors. It is most effective when you would like to highlight your device’s unique features or advanced architecture that differentiates it from similar products on the market. As a result, you make your customer believe that your smart device has a higher value than other products because your price is higher. At the same time, it can also be a risky strategy, because if your device is not unique enough, you are betting that your potential customers will not find out your product’s real value.
As opposed to a prestige model, economy pricing keeps the price of your smart device lower than average due to decreased production costs. It is often used by large and medium size businesses which have enough resources to keep their product prices low compared to other companies on the market. You can minimize your expenditures by cutting advertising and promotional costs and thus make your product more affordable and attractive for customers with a lower income level.
Bundling strategy allows company to sell multiple smart devices at a lower price than if a customer was to buy each device individually. This model can be very advantageous for IoT smart appliances which are often inter-connected between each other. What is more, bundling builds up value for every purchased device in the eyes of the customer because they are buying it for a lower price. Make sure to discuss a potential bundling strategy with your marketing and sales team who would come up with effective promotion and reasoning for why your customer needs to buy a few products at once rather than each product individually.
Developing effective communication channels with both external and internal stakeholders (teams, vendors, investors and suppliers) is essential for a well-thought product pricing. Many companies make a big mistake by ignoring their loyal customers’ opinions and expectations towards the product price. Customers are one of the key contributors so it is important to communicate with them and be as transparent as possible.
Your future IoT partner will have to work in a multidisciplinary environment and solve the upcoming tasks in a timely manner. Thus, it is essential that the software partner you decided to collaborate with has an ability to perform tasks within given time frames. In case your potential vendor fails to meet the deadlines during a trial period, it is a good idea to think about changing a partner. Clearly communicate your needs and expectations to your vendor and make sure that IoT software partner follows the deadlines and requirements.
Marketing and Promotions
Did you know that 9 in 10 customers check their emails at least once per day? That is why a well-thought promotion strategy is essential for every successful company. You can use pricing as a part of marketing campaign and attract new customers with attractive offers that is hard to resist.
Making sure that your smart device pricing remains competitive throughout the year is a crucial part of every successful business strategy. Final product price is often a result of negotiations and compromises made with your team, investors, suppliers and customers. Thus, it is essential to spend enough time reflecting on your product pricing strategy as well as goals and plans you company pursues when setting the final price.