DIFFERENT PRICING STRATEGIES

DIFFERENT PRICING STRATEGIES

1. Pricing for market penetration

As a small business owner, you’re likely looking for ways to enter the market so that your product becomes more well-known.

Penetration strategies aim to attract buyers by offering lower prices on goods and services than competitors.

2. Economy pricing

This pricing strategy is a “no-frills” approach that involves minimizing marketing and production expenses as much as possible. Used by a wide range of businesses, including generic food suppliers and discount retailers, economy pricing aims to attract the most price-conscious consumers. Because of the lower cost of expenses, companies can set a lower sales price and still turn a slight profit.

3. Pricing at a premium

With premium pricing , businesses set costs higher because they have a unique product or brand that no one can compete with. You should consider using this strategy if you have a considerable competitive advantage and know that you can charge a higher price without being undercut by a product of similar quality.

4. Price skimming

Designed to help businesses maximize sales on new products and services, price skimming involves setting rates high during the initial phase of a product. The company then lowers prices gradually as competitor goods appear on the market. An example of this is seen with the introduction of new technology, like an 8K TV, when currently only 4K TVs and HDTVs exist on the market.

5. Psychological pricing

Psychological pricing refers to techniques that marketers use to encourage customers to respond based on emotional impulses, rather than logical ones.

6. Bundle pricing

With bundle pricing, small businesses sell multiple products for a lower rate than consumers would face if they purchased each item individually. A useful example of this occurs at your local fast food restaurant where it’s cheaper to buy a meal than it is to buy each item individually.

7. Geographical pricing

If you expand your business across state or international lines, you’ll need to consider geographical pricing. Geographical pricing involves setting a price point based on the location where it’s sold. Factors for the changes in prices include things like taxes, tariffs, shipping costs, and location-specific rent.

8. Promotional pricing

Promotional pricing involves offering discounts on a particular product. For instance, you can provide your customers with vouchers or coupons that entitle them to a certain percentage off the good or service. You could also entertain a “Buy One Get One” campaign, tacking on an additional product as an add-on.

CONDITIONS UNDER WHICH PRICE AND NON-PRICE STRATEGIES

WORK BEST.

1. Reference price effect – The buyer’s price sensitivity for a given product increases the higher the product’s price relative to perceived alternatives. Perceived alternatives can vary by buyer segment, by occasion, and other factors.
2. Difficult comparison effect – Buyers are less sensitive to the price of a known or more reputable product when they have difficulty comparing it to potential alternatives.
3. Switching costs effect – The higher the product-specific investment a buyer must make to switch suppliers, the less price sensitive that buyer is when choosing between alternatives.
4. Price- quality effect – Buyers are less sensitive to price the more that higher prices signal higher quality. Products for which this effect is particularly relevant include: image products, exclusive products, and products with minimal cues for quality.
5. Expenditure effect – Buyers are more price sensitive when the expense accounts for a large percentage of buyers’ available income or budget.

REFERENCES

1. Pricing Vs. Nonpricing Strategies by Ronald Kimmons; Reviewed by Michelle Seidel, B.Sc., LL.B., MBA; Updated February 13, 2019

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