Pricing & Packaging

Pricing and packaging refer to the process or sequence of steps companies and businesses use to sell their products or services to customers most effectively. Many companies, from produce to professional businesses, use pricing and packaging. In addition to setting reasonable yet profitable prices, produce corporations create a transportation and storage schedule that safely moves their product from one place to another. Product marketing managers (PMMs) are responsible for pricing and packaging arrangements at most businesses.

Pricing and packaging are vital in how businesses interact with customers. They are the fundamental building blocks for shaping a quality experience for your company and the customer. The price and display of products and services are the first aspects customers see of your product or service.

• Importance of Pricing Strategies: Creating an effective pricing strategy depends on the customer market. Pricing strategies like fixed costs and seat-based pricing focus on fewer customers or one-time purchases. In comparison, variable costs and usage-based pricing depend on more customers and repeated purchases.
• Importance of Packaging Strategies: Equally important as creating an effective pricing strategy, creating effective packaging strategies will aid in maximizing a company’s revenue. Packaging strategies can focus on long-term gain, building a loyal and strong customer base, or on short-term gain, earning rapid sales in a short period of time. Packaging also includes the shipment, handling, and security of products and services.
• Example Businesses that Utilize Pricing and Packaging: Pricing and packaging are used by many companies in different industries. All-profit companies utilize some sort of pricing and packaging strategy (e.g., Walmart, Target, McDonalds).

Pricing and packaging strategies are crucial to maximizing a company’s revenue, as this is how products and services are presented to customers. Effective pricing and packaging will balance the affordability of costs and securely transport the product to customers or retail stores. In addition, pricing and packaging are how companies differentiate from their competition while appealing to their target demographics.

Types of Pricing Strategies

• Fixed Costs: Companies that rent out facilities or sell their services for software setup will likely have fixed costs. Fixed costs are a set price for a product regardless of how many are produced. For services, fixed costs are a set price for a certain amount of time, regardless of how much work is assigned.
• Variable Costs: Variable costs are much more common for companies. Variable costs depend on a product’s production rate, resulting in larger costs for more products and smaller prices for fewer products. Produce companies and regular sit-down restaurants (Excluding all-you-can-eat) charge for each dish ordered. With more people, the expected number of dishes ordered increases, increasing the total price of the meal.
• Usage-Based Pricing: Similar to variable costs, usage-based pricing mainly refers to technological companies that charge based on a certain period of time used on the product.
• Seat-Based Pricing: Similar to fixed costs but for companies that charge for the number of users on a platform or product, seat-based pricing allows customers to purchase usage only for a certain number of users.

Packaging Requirements Examples

In addition to pricing, companies with produce must ensure their product is transported safely and securely.

• Mail: Postal office workers must first sort mail and handle it carefully to ensure it ends up in the right place, ready for neat and undamaged transport. Next, during transport, whether via train, plane, or truck, transporters must ensure that no mail is lost or damaged upon delivery.
• Produce: Food items such as eggs, vegetables, and bread must be transported quickly and under sanitary conditions from distributors to restaurants to ensure that restaurants receive their ingredients promptly and hygienically to be readily served to customers.
• Retail companies: For retail companies such as Goat or StockX, re-sellers build a reputation for trusted products if the quality of the product is ensured, the shipment arrives on time, and the shipping prices are reasonable.

How to Boost Pricing Effectiveness

• Setting Prices According to the Market: When setting prices for a product with a wide variety of distributors in the industry, consider your competition’s prices and the overall market demand and time you sell products. For example, giving out discounts on holidays or special events to attract more customers.
• Setting Prices Accounting for Production and Expenses: To maximize profits while setting the price for a product, the cost of production and a reasonable markup are required. Adding up expenses and fees to find a reasonable profit is crucial in building a good customer experience.
• Setting Penetration Prices: For startup companies or smaller businesses newly entering the market, setting lower prices initially will most likely attract customers quickly.
• Setting Prices According to Customer Worth: In a market with affluent customers, setting higher prices for larger profits is possible, as wealthier customers may be more likely to spend more. However, vice versa, if selling to a network of struggling customers, lower prices may build trust and repeat purchases.

How to Boost Packaging Effectiveness

• Product Bundling: Product bundling is a type of packaging that includes multiple products or a collection of services at a lower price than if the product or services were purchased separately. This strategy encourages high sales volume.
• Tiered and Freemium Packaging: Packaging involves more than just shipping handling and processing. It also involves different versions of a product or service, which are offered at various prices; premium features are worth more.
• Limited-Time Discounts and Offers: Creating special pricing for products and services for a limited time period creates a sense of urgency, boosting short-term sales.