Pricing Strategies

In: Business and Management

Submitted By gourgra1
Words 3532
Pages 15
As we already are aware the Pricing strategy is one of the Marketing Mix’s “Four Ps” along with the Product, Promotion and Place strategy. In this article is described more specifically how different pricing policies are viewed from the customers as well as the considerations lying behind of a low price. Moreover, the article describes the association between each strategy with the pricing strategy and how the combination influence different outcomes.
To conclude, the article along with the illustration of those strategies makes a linkage between them and the Total Customer Value.
1) Organizations should pay equal attention to both Four” P’s” strategies and do not focus solely in the pricing strategy, since all these components are of great value as long as the firm knows how to take advantage properly.
However, small/medium sized businesses mostly of the time relies on the pricing strategy as they think that price is the most significant point of reference of how customers and competitors view them in the market.
2) Firms should find such equilibrium in their pricing strategy, nor too high or nor too low. This price should reflect the value proposition of the firm, which should be consistent, and, therefore support its business model.
If a company places the price too high, automatically makes the product unaffordable for the majority of people, therefore luck potential for huge growth. On the other hand, if the price is too low, may attract customers but in a limit way, since a low priced product do not live room for potential development or to promote it in innovative ways and to expand its placement. As a consequence, once the firm enters into the competition, considers that the only way to win is entering the price war. For example if a company’s product is premium priced and the company’s…...

Similar Documents

Product and Pricing Strategy

..., the product being marketed in an ideal product position will gain consumers and add value to the brand. However, none of this can be achieved without an initial, effective marketing approach. It is imperative that a firm be aware of consumer purchasing behaviors, consumer’s needs and wants of the features of the respective products, the consumer’s brand identification aspect, and the unique features that are provided of the product and services from the firm. (Winer, 2007) Pricing Strategies (Penetration and Skimming) “The key pricing decision becomes how much of the customer value to keep or give away…” (Winer, 2007) For a firm, pricing can accomplish a number of objectives for many different products and services. One method of pricing principles is penetration pricing. Penetration pricing or market share pricing strives towards giving the most value to the customer while retaining a small margin. “The objective is to gain as much market share as possible.”(Winer, 2007) Often, penetration pricing is utilized as an entry strategy for a new product. Additionally, it is an effectively useful for the prevention of competitive entry. This is because of two reasons; first, is “there is less of the market for the competition to gain if you have been successful in penetrating the market.” (Winer, 2007); and secondly, in an economic standpoint, the entry appears less attractive when price levels are low. Moreover, penetration pricing is appropriate when scale effects......

Words: 1631 - Pages: 7

Pricing Strategy

...Appropriate Price Strategy Price strategy is an essential and most vital element that is involved in the marketing process. Pricing a product to low would affect the bottom line negatively. On the other hand if the price of a good or service is too high, then nobody will purchase them. The key is to research and compare all available pricing strategies and choose which the best one for a particular situation. Prices have always been the center of human interaction ever since traders have been in existence. It should come to no surprise that all companies in different industries spend countless time figuring out how to price their products and services competitively. Examining factors that may impact the development of our marketing strategy may require an assessment of a variety of factors in which includes a market analysis as well as an analysis of the Eaton’s position of the brand within the market. Being able to determine the appropriate marketing mix for the Eaton tablet will define how the product will be viewed by others that are looking in. The marketing mix will be consisted of a definition to what exactly the Eaton tablet does and how it will help optimize employee capabilities at the same time lessen the consumption of paper and employee communications. Determining the appropriate marketing mix for the Eaton tablet would consist of defining exactly what the tablet does and how it can be incorporated to every business out there to get the same output. Developing...

Words: 588 - Pages: 3

Pricing Strategy

...Assignment #1 Posted by Ge Gao at Saturday, July 7, 2012 1:49:33 PM CDT   1. Are you influenced by coupons and promotions? Does it change your buying patterns? How does it influence your perception of value?  Yes, I’m influenced by coupons and promotions. It does change my buying patterns. I would buy some products for the future or products I don’t need. It makes me feel that if I spend time on looking for coupons and promotions, I can get those products at a lower price. I think I can pay less to get the same value, or get a higher value than what I pay by coupons and promotions.   2. Ron Johnson had a successful track record at Target and Apple. Are the questions around his new pricing strategy for Penney premature?   JC Penney is trying to find a customer segment that is not entirely focused on price and deliver a different experience to them. But the problem is that JC Penney is currently a “me too” retailer, with nothing unique to offer. They are selling to a customer segment that is trained to look for the cheapest deal and their products don’t possess the differentiation to take consumer’s focus off its price. When selling a relatively undifferentiated product, it is hard to convince customers to pay more than what a lower priced competitor might offer. Differentiation is a key to avoiding steep discounts, and for JCP it seems pre-mature to offer lower prices when products are not differentiated. That differentiation can come from products or from the service...

Words: 881 - Pages: 4

Pricing Strategy

...PRICING METHODS 1. MARKUP PRICING: - This method is to add a standard markup to the product’s cost. Construction companies submit job bids by estimating the total project cost and adding a standard markup for profit. Lawyers and accountants typically price by adding a standard markup on their time and cost. Unit cost = Variable cost + Fixed Cost Unit sales Markup price = Unit cost 1 – Desired return on sales 2. TARGET- RETURNS PRICING: - In target return pricing, the firm determines the price that would yield its target rate of Return On Investment (ROI). General Motors has priced its automobiles to achieve a 15% to 20% ROI. Target – returns price = Unit Cost + Desired return * Invested Capital Unit Sales 3. PERCEIVED- VALUE PRICING: - An increasing number of companies now base their price on the customer’s perceived value. Perceived value is made up of several elements, such as the buyer’s image of the product performance, the channel deliverables, and the warranty, quality, customer support, and softer attributes such as the supplier’s reputation, trustworthiness, and esteem. Companies must deliver the value promised by their value proposition, and the customer must perceive this value. The key to perceived value pricing is to deliver more value than the competitors and to demonstrate this to...

Words: 481 - Pages: 2

Pricing Strategy

...• Before we take up on any strategy we should look at the bigger picture and see how our product fits in the market. What value or need is it satisfying. • Eliminate the segments that will not buy the product o Match the value drivers of the customer against the product - exclude price --> by doing this we are looking for customer who can potentially buy the product. This is called the broad horizontal segment. o Divide the horizontal segment into different vertical segments according to their price sensitivities. o Set a price by targeting segments in order to maximize profits • Value of the product to the customer  EVC = reference price + value (product - reference) • This is the highest price that a company can charge for the product  How do I find refernce product? • Look for an alternative that a customer is currently using. Look for a similar product that is in close competition with the product eg land rover and jeep • Look for a product that serves the same function as the target product eg calculators and slide rules • None of the above • Assumption - the competitor will not change the price if our product enters the market • WTP of the customer  This is between the variable cost and EVC  Sometimes consumers are not aware of the added value so if a price is too close to EVC customer will not buy it. We need to educate customer s about the values  In case of high switching costs the product should be priced low to offset the switching costs ......

Words: 371 - Pages: 2

Pricing Strategy

... offered at 50% off regular pricing. Through this three day promotion, WELLNESS, INC. experienced an increase of exposure through website traffic from approximately 100 visitors to 4,000 visitors. At the time, WELLNESS, INC. added an additional massage therapist. The promotion yielded 75 new clients with only five rebooked/recurring clients. In 2012 WELLNESS, INC. did another promotion with Groupon offering 50% off regular pricing. Through this three day promotion, WELLNESS, INC. experienced an increase of exposure through website traffic from approximately 4,000 visitors to 116,452 visitors and 176 new clients with approximately 25 rebooked/recurring clients. The disparity of number of visitors and actual new clients is due to the second promotion included an expanded audience to include Navarre Beach with some clients in the Milton/Pensacola area where WELLNESS, INC. is located. What WELLNESS, INC. learned from the experience of promoting through Living Social and Groupon is that the demand is elastic and sensitive to price, hence, the lower the price the more quantity clients purchased and attracted another market segment. With the Groupon promotion, WELLNESS, INC. sold 176 Groupons in three days. WELLNESS, INC. tracked the market segment of the Groupon clients to be working individuals, mostly females with incomes of $60,000 or less per year. How can WELLNESS, INC. use various price discrimination strategies to capture new segments and capturing the client’s......

Words: 2212 - Pages: 9

Pricing Strategy

...Pricing Strategy Establishing an effective pricing strategy is crucial for the success of a business when launching a product or service. “Pricng decisions affect both the number of sales a firm makes and how much money it earns.” (University of Phoenix, 2011, para. ) Indeed, one of the most important issues facing any business is determining how much to charge for a product or service. The market for tablets and other mobile devices has a wide range of options to choose from. Prices range from as low as $59.99 for a smaller Proscan tablet at sold at Wal-Mart to Apple’s iPad starting at $349.00 and go higher depending on how much memory you’d like to have included. Amazons Kindle Fire HD offers a quality product at a competitive price point considering the quality of materials such as HD camera and HD display, for around $299.00 with smaller size Kindle Fires going for $160.00 An effective pricing strategy when launching the Kindle Fire Hd would be initiating a penetration pricing policy that covers a wider demographic. Apple’s iPad appeals mainly to the elite market. Amazon doesn’t have a discount plan to offer but does have additional incentives to set itself apart from competitors. The convenience of the Amazon store means purchases and additional features and content are readily available to add to the device. Amazon Prime membership also adds to the experience offering free content available to be viewed at no additional cost. Additional perks such credits that can......

Words: 272 - Pages: 2

Singapore F1 Pricing Strategy

...Executive Summary This report focuses on the use effective pricing strategies to maximize profits from F1 ticket sales. We believe this to be an important objective for the F1 management given high costs of hosting the F1 race each year. Effective pricing strategies can help to recoup the cost of the race and possibly even generate revenue for the organizers. The first part of this report focuses on the effectiveness of existing price strategies such as perception based pricing, price discrimination, bundling and discount management. Our analysis suggests that the F1 tickets in Singapore are wrongly priced as it fails to capture perceived benefits such as having a city track and being the first ever night race. It is, however, too late to reset the price as the reference point has been established. Next, we argue that while the use of price discrimination has increased the total revenue from ticket sales, the extensive use of early-bird based pricing has reduced the effectiveness of discount pricing. While some bundling strategies currently in place, we believe that more can be done to increase the perceived value and to capture greater market share. We have provided suggests for this in section 7. We further evaluated the use of discount management for quantity purchases and conclude that the use of high discount (≈15%) for greater quantity sale will only be financially justified through high volume sales. Finally, we propose several solutions to increase F1 revenue...

Words: 3864 - Pages: 16

Pricing Strategy

...Market Structures and Pricing Strategies Kiona Thomas American Public University Econ600 Abstract The article analyzes the four main market structures, which are perfect competition, monopolistic competition, oligopoly and monopoly. It provides a detail description of the market, as well as explains the pricing strategy a firm would pursue in that particular market. The article also concludes with a real world example of Visa pricing strategy by examining it oligopoly market structure. Visa has few competitors; however, it must continuously monitor its competitor’s actions in order to remain competitive in today’s market. While, Visa is currently out performing it competitors, they are constantly trying to expand their market. Keywords: market structure, pricing strategy, Potomac Edison Market Structures and Pricing Strategies Introduction Economist can divide today’s market into four different market structures, which are perfect competition, monopolistic competition, oligopoly and pure monopoly. The market structure will help the firm select their pricing strategy. Each market structure has a different pricing strategy the organization can use to achieve profit maximization. Perfect Competition What is perfect competition? Perfect competition is sometimes referred to as pure competition (Officer, 1966). According to Robinson (1934), perfect competition is “a state of affairs in which the demand for the output of an individual seller is perfectly...

Words: 1857 - Pages: 8

Fisherhunt Pricing Strategy

... tailored to the low or moderate income consumers, including an installment payment option. Meanwhile, Fingerhut could make more profits. There is a proverb in Nepali “Ghati herera haad nilnu parcha” which means “cut your cloth according to your cloth”. Based on this saying, I don’t think the company is at any fault. It is the customers who are to be blamed. The company didn’t put a gun to their faces to buy their goods. Just because you are attracted to certain advertisements doesn’t mean you go ahead and buy those things. Consumers need to really know if they can afford getting on credit and paying them in the future. To conclude, the company makes profits for the shareholders and provides a good price and service to the customers. Fingerhut didn’t violate any absolutes and laws. Therefore, the company’s price strategy should be accepted. Fingerhut has a duty to provide good products and services to its customers. It still has a duty to make profits as much as possible by adjusting pricing strategies and marketing approaches....

Words: 932 - Pages: 4

Sony Pricing Strategy

...), compared to 155 million PS2 (31/3/12). After the failure, Sony CFO claimed that the PS4 wouldn’t be “a loss-leader at launch” . The latest model PS4 cost 381, 18 under the sale price. Cost-based pricing Sony used the cost-based pricing strategy. A good example is PS3, and also a terrible example of cost-based pricing. They launch their product with a price of 599, which is much higher than their previous product or even competitors’ and it’s based on the production cost, which is about 800. Comparison Home consoles | PS4 | PS3 | Xbox One | Wii U | Owner | Sony | Sony | Microsoft | Nintendo | Price | 399.99 | 299.99 | 349 | 299.99 | Handheld consoles | PS Vita | Nintendo 3DS XL | Nvidia Shield | Owner | Sony | Nintendo | Nvidia | Price | 199.99 | 199.99 | 199 | In comparison, Sony Playstion handheld product’s price are the same as other competitors. The PS4’s price is higher Sony still sells PS3 for 299. So basically, their product’s prices are the same as other competitors’. References: Product Life-Cycle Management: Sony’s PS2 & PS3 Pricing Strategies. Cost-Based Pricing, Value-Based Pricing, and Price-Based Costing. ...

Words: 463 - Pages: 2

Pricing Strategy

... customer better. Though market segmentation, the organization gets a chance of creating various profiles about the different customers that they serve. This information is very useful in the coming up with better marketing programs and further will help in developing products that customers need (Viglia, 2014). Market segmentation helps in discovering the various ways in which your product is being used be the different groups. This may help to identify the alternative uses of the product that has not been identified before. By exploiting the new idea, you may discover new markets for your products which can significantly increase the revenue previously generated by the product. New markets mean new customers, therefore segmenting the markets can lead to widening the product market which also increases competitiveness. Market segmentation can lead to the establishment of more efficient distribution networks. Creating segments within the markets helps to study the customers better and understand their buying behavior (Jones, 2008). If the customers are more comfortable with online shopping, the organization can focus on the online portal and reduce the retail outlets which saves resources for the organization. Analysis into the segments can also provide vital information as to why certain customers are not buying your products. This helps to identify ways of satisfying this forsaken group and by doing so, new customers can be assimilated by the organization. Pricing......

Words: 2047 - Pages: 9

Pricing Strategy

...Running Head: LONG-TERM INVESTMENT DECISIONS 2 Introduction A low calorie foodstuff or a healthy option of food is a fresh concept which has gained a lot of interest in the modern times. In the previous project we had discussed the background and the introduction of the corporation which wants to cater to this division. This paper will talk about the long term capital budgeting decisions that such a corporation desires to make. Pricing Strategy The Company aims to keep the prices of its products as inelastic as possible. This means that the  pricing strategy should have no impact on the way the consumers perceive and buy such  products (Definition of Inelastic, (n.d.)). Generally we see such demand only in situations in which the good or services are indispensable and the consumers cannot do without those. But this is not the case for microwavable food products. The demand function for low calorie microwavable food largely depends on the price of the merchandise, its relative (substitute)  product, advertisement overheads and last but not the least on the income of the consumer. From the demand function and the elasticity considered, it is established that the market for the low calorie microwavable foodstuff fit in to a market of monopolistically competitive type. A monopolistic competitive is distinguished by a reasonable number of buyers and sellers. As a result people can change to another brand if a specific brand charges a soaring price. However...

Words: 784 - Pages: 4

Celcom Pricing Strategy

...Celcom use price penetration strategy and psychological pricing when it comes to gain large market share and customer base. Celcom often offers new product from year to year that it is crucial to play around with the figures to either trick or attract customer to win over their preferences when selecting Telco Company. “With high availability of internets across the Malaysian globes, a price penetration strategy is advisable to enhance customer’s usage, and introducing the service. On the other hand, they would use that opportunity to increase price on improved products. Celcom should also be sensitive to the price elasticity of its product and overall consumer demand.” (Celcom Official Website, 2009) Penetration pricing is commonly used by utilities, especially phone and cable or satellite services, although it is sometimes found in competitive gas and electricity markets as well. Many home phone, cellphone, cable and satellite providers offer a discounted rate for a period of time, such as your first six months of service, to get you to switch to their service. After your discount period has ended, the price increases significantly, but the company hopes you have become used to its service and won't go through the trouble to change to a different company. KUALA LUMPUR: Celcom Axiata Bhd aims to strengthen its market penetration in the middle to high-end customers segment in urban areas this year via a number of Internet-centric products it has been launching since......

Words: 315 - Pages: 2

Strategy Pricing of Quasar

... Strategy Simulation Individual Assignment Introduction There are four types of market categories used to classify pricing of product that are as follows: monopolistic competition, monopoly, oligopoly and perfect competition. The type of company and the amount of products being produced determines the market structure for any given company. Each market structure is used to help determine the pricing and non-pricing of the products. The economy in the US is very competitive with numerous of buyers and sellers. Monopolistic Competition According to McConnell & Brue (2004), the idea that each market has its own pricing method is known as a monopolistic competition. In this structure is there are several vendors, variety of products and an easily accessible industry. Each company has the ability to determine its own pricing and can make adjustments according to the sales threshold. However, these industries gain a small percentage of the market price and they will adjust their products to meet customer demand in order to remain profitable. The idea is to make the product more attractable than to make a profit. For instance, if Nike creates a fabulous running sneaker then Adidas will try to imitate and create fancier running sneaker to remain competitive and profitable. According to Wikinomics (2010), the industries in this market rely heavily on advertising in order to entice consumer to purchase their products. Another example of a monopolistic industry is the auto...

Words: 1889 - Pages: 8