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How Xiaomi prices its high-end phones at low prices | YourStory

The pricing conundrum and a wee bit of Economics

Pricing is probably one of the most difficult parameters to optimize, for any company. It’d seem simple enough – just sell the product for more than what it costs. But price is determined by several other factors like branding, positioning, marketing, and many times more important than most – psychology.

For example, if you want to price your products at a premium (think Apple), the product needs to have a unique positioning, in terms of USP of the product or a never-before-seen innovation. You can then employ the WTMWB pricing strategy – What The Market Will Bear, and try to sell at premium prices as fast as possible before the competition gets on to your USP and tries to undercut you. This strategy works best with ‘Early Adopters’ as these are the set of people who are not very price-sensitive and look to get their hands on new, innovative technologies.

The GPMT strategy in pricing

GPMT or Gross Profit Margin Target is what the companies usually look at when trying to set prices. In simple terms, it is the gross profit margin that they need to pay back their expenses and generate positive net income and cash flow.

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How Xiaomi prices its high-end phones at low prices.

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