Understanding Pricing Strategies: A Comprehensive Analysis
Understanding Pricing Strategies
Definition of Price:
- Monetary: Quantity of money to pay for a good or service.
- Economic: Utility of a good to meet exchange needs.
- Value: Function of a product or service’s capacity for exchange.
- Product: Reflection of costs of procurement or production of a good or service.
Value and Price Within an Enterprise:
Sales, profit, ROI, and other variables in the marketing mix.
Factors Affecting Price:
Consumers, governments, competitors, current and future manufacturers, wholesalers, and other suppliers.
Objectives of Price:
Financial:
- Performance
- Maximization of benefit
Commercial:
- Growth of sales
- Increase in repurchase rate
- Market participation
- Attracting new customers
Competitive:
- Market stability
- Competition
- Based on the competition
Pricing Strategies:
Strategies for New Products:
- Skim Pricing
- Penetration Pricing
- Neutral Pricing
- Experience Curve Pricing
Strategies in the Product Line:
- Price Set
- Prices Marked
- Rate of Image
- Price Primate
- Price Complementary or Price Parties
- Price Custom
Promotional Pricing Decisions:
- Discounts over time or intertemporal price discrimination
- Discounts in newspapers
- Random discounts
- Nonlinear pricing
- Quantity discounts
- Odd/Even pricing
Price Discrimination Between Consumer Segments:
- Rates by geographic area
- Price only
Skim Pricing:
- Description: Applies a high price to the product in the introductory phase.
- Targets: Discriminate among consumers according to their reserve price. The price is subsequently reduced with the emergence of new competitors, or to satisfy the segments most susceptible to price.
- Requirements:
- High product differentiation
- Entirely new product
- Demand insensitive to price
- Disadvantage in costs
Penetration Pricing:
- Overview: A low price is applied to the product introduction phase.
- Objectives: Increase the speed of adoption, become the standard for best seller, long-term objective.
- Requirements:
- Low product differentiation
- Uneventful product
- Demand responsive to price
- Cost advantages (economies of scale)
- Unused productive capacity (or plant with excess capacity)
Neutral Pricing:
- Description: Search for a reasonable price for most consumers.
- Targets: Maintain a profit margin per unit sold.
- Maintain consistency in pricing new products within the company’s product portfolio.
- Prerequisites:
- Low product differentiation
- Many competitors with similar size
- Demand responsive to price
Experience Curve Pricing:
- Description: Apply a price slightly below development costs. Cost reductions from sales accumulation will be transferred to prices.
- Targets: Accumulate a large volume of production quickly, long-term objective.
- Requirements:
- Low product differentiation
- Demand responsive to price
- Cost advantage: Experience
- Idle production capacity
Price Set (Price per Pack):
- Description: One price applies to a set of products in a product line that can also be purchased separately or not.
- Targets: Maximize units sold in a series of products offered jointly at one price. Simplifies the purchase decision for group offers.
- Requirements:
- Consumers have different reservation prices for package products.