Find out about price optimization, how to choose a price optimization model, and what are the most advanced price optimization techniques for real estate development. Taking into account all these aspects, you will be able to apply them to your business properly.
The right pricing is the most essential point in any business. It can make or break your enterprise. It is worth knowing that copying your competitors is not the way to success. Usually, it might cause price wars and harm your organization very much.
Successful price optimization means a balance between valuable and lucrative that can have a great impact on your sales, customer satisfaction, profits, and achievable growth goals.
Anyway, price optimization is not a simple process. It needs investigation to understand your customers and your business better. It is always too complicated to define the best price for your product or service based on competitors in the market. However, it is possible to do all these things if you have the right price optimization tools and a strong understanding of the basic pricing concepts.
This guide aims to help new businesses and remind established ones of all tips that can be useful to create and implement a good pricing strategy. Each section of the guide explains all stages of the right price optimization for real estate development.
Price optimization is the process of collecting data from customers and the market to get the most effective price point for your product or service that will maximize sales and profitability.
The optimal pricing is the price where companies might best achieve their goals, for instance, increased profit margins, customer growth, etc.
Some concepts play an important role in price optimization:
Pricing optimization is a close process to dynamic pricing strategies used in different industries. Dynamic pricing tends to change much more rapidly as companies modify the price based on real-time demand.
There are some key factors you should consider while defining the optimal price point for real estate.
Depending on the type of real estate, its location is assessed differently. For example, for a warehouse or factory, it is important to have a railway nearby, but for housing, it is rather a disadvantage.
For commercial premises, it is very important to have a parking lot and a convenient entrance. It is worth noting whether competitors who offer the same product or service work nearby, whether there is a good cafe or stable Internet connection. As a rule, those who buy housing are interested in having shops, nursery schools, schools, hospitals, park areas, etc.
Here pay attention to whether repair or replanning are needed, and how communication systems work.
The most important are the area, the number of storeys, year of construction of the house, a yard and a playground, availability of balconies or loggias, illumination, etc.
Proper calculations and the right price determination allow you to encourage more potential customers to buy your product. Don’t forget about special offers and possible discounts.
Taking into account all these points, you can calculate the optimal price point for real estate development.
Price optimization has come a long way from the time-consuming processes of the past. Today, price optimization software can greatly facilitate the process of collecting customer data, optimize prices and increase profits.
Using algorithms and artificial intelligence can help you with price optimization and make your work easier.
No matter which pricing optimization tool you choose, here are a few essential features you should know.
The right pricing optimization tool can show you which features customers value the most, and are most willing to pay for, with precise package and pricing recommendations based on the customer data analysis.
Localizing your pricing can increase conversions. Software pricing optimization can help you take advantage of this growth, keeping customers around the world satisfied.
Do you know your range of potential customers? Price optimization software allows you to work with customer segmentation and shows which demographics to focus on. Moreover, you will get valuable insights on what features and value offerings customers are ready to pay for more.
Your development time is limited, so you should always spend your work time properly. Before you start building, use pricing data to create a product roadmap to find out what potential features most customers will enjoy and provide the most revenue. Conduct retention analysis to determine customer engagement with the features once they appear.
Stay ahead of the curve and track your brand with minimal cost through automation. Pricing solutions tell you which features and parts of your brand dominate within your customers versus your competitors, letting you follow the amplification of your brand and ensure competitive prices.
Establishing the proper price for your product or service starts with a great understanding of your potential customers. You ought to pay attention to the preferences of your customers and what exactly they don’t need. You also need to understand your market: retailers will have different considerations than large companies, including real estate development.
Once you totally understand that you are doing well and your potential and existing clients are satisfied, then you should only monitor your pricing and improve it from time to time.
When we deal with price optimization, there should be mentioned both qualitative and quantitative data. Hard data is the only way to determine how much customers are ready to pay for your product or service and make sure you are doing everything properly.
Quantitative data includes such points as transactional data, customer reviews, supply and demand data, etc., and tells you about your advantages and what you need to change or improve. Pricing optimization software can help you to make sense of those figures and turn them into pricing insights by investigating your data according to demographic, psychographic, and customer preferences.
Qualitative data also comes from talking to customers. Surveys are great, but not in conversation phone mode when customers have no time to discuss topics such as their price sensitivity and what features or benefits they value most in your product. Usually, it is better to hold meetings or send a short online survey. As a result, you will get to know what potential customers expect from you as a real estate developer.
Once you have collected all your customer data, it is time to work out what “value” actually means to your customers. That means working out your value metric. Your value metric is actually what and how you charge a fee for your product. Identification and pricing according to your proper value metric is the variation between surviving and growing.
Usually, your value metric is pageviews — the price increases depending on how many page views your site handles per day. The better your site is made, the more customers’ attention it covers. As a result, demand for your products increases.
You have collected some customer data and worked out what your customers’ value is — now it is time to look for patterns in the features, benefits, price points, and value metrics that drive or detract from value. You will also find out how willing different segments and personas are to pay different prices for your products.
Use the results to produce tiers and appropriate packages for your product or service. Each tier should be priced along with your value metric and should align with your different buyer personas so that you are offering the right amount of product or service to each customer segment.
Even when you already set your prices, don’t forget to still monitor the actions of your competitors and adjust your pricing.
Pricing is an ongoing process. You ought to always monitor and improve your pricing strategy. Think back to our dartboard example from earlier — regulating your pricing helps eliminate sections of the dartboard, focusing on the right region for your dart to land as you learn more about what works.
You need to continually collect data and analyze the value customers are getting from your product to make sure that what you are offering still meets your customers’ needs and pricing desires. Be sure to monitor your pricing closely and track customer behavior. If necessary, review and change the situation, but do not rush to change it, as you may alienate your customers.
Demand for real estate will always exist. This is an important choice for each customer. Clients will always hesitate, compare and think about which developer to choose. So, you should always take into account all the above factors to keep the customer satisfied.
If you think about pricing research, you will conclude that there are two types of price optimization models. One deals with finding the right pricing strategy for your business, and the other deals with figures and numbers. Let’s explore them both.
Before working with the various pricing strategies, it is important to know the difference between a pricing strategy and price optimization.
A pricing strategy is a model used to establish the most suitable price for a product or service. Each strategy has its advantages, disadvantages, ways of use — depending on the business or industry. If you are ready to compare how one strategy compares to another, try to use the sales pricing strategy calculator to plan and calculate your income.
When you choose a strategy, then start dealing with the optimization part. Setting an optimal price is a part of any pricing strategy which ensures you are pricing products and services in a way that meets your goals. Let’s look at common pricing strategy models, such as:
Try to analyze your current pricing strategy. If you have price optimization problems, maybe, it is time to switch to a better model! Ideally, you can do this while you are updating a product, changing your marketing strategy, or setting new pricing goals. In the case of real estate development, it is worth doing when you launch a new project, select proper pricing strategy, and price optimization model.
The second type of optimization model is about everything related to mathematics and calculations.
Optimization models are programs that are based on mathematics which usually use various kinds of data, including demand, price level, costs, inventory, customer behavior, etc. to recommend prices that maximize profits.
These solutions have been evolving for decades, with recent advancements in artificial intelligence and machine learning technology changing the way of determining the best price. The tools can help you set the initial price, the discount price, or the promotional price of your product or service without the need for many analysts who work long hours over a spreadsheet.
There are some steps on how to use a model effectively:
Machine learning is a new technology, and it has already established itself in the business world. Price optimization is that process where machine learning has already proven its value. All large companies have achieved remarkable results using machine learning price optimization. As a result, smaller retailers follow this example and implement machine learning price optimization. This happens because based on complex market conditions, manual pricing reaches the limits. Previous mathematical models are too simplistic, and human intervention makes predictions unreliable.
Companies that refuse the support of machine learning in price optimization are likely to have serious problems soon. This is because the new technology works much more reliably and undoubtedly faster.
Why is it worth investing in smart price optimization tools and software? The programs are a simple way to increase sales and profits without worrying about fundamental principles of strategy and offering. They deliver maximum results with minimum investment. For now, it is not necessary to develop machine learning models again and again. Modern tools are affordable for any company to get started with machine learning-based pricing.
To be a leader in the market as long as possible, always try to follow tendencies, monitor market changes, improve your business skills, and focus on customers’ preferences. Always remember about price optimization and its tips to provide your customers only the most suitable services.