PRICE STRATEGY
... List some of the price strategies that are used in today marketing environment. PRICING STRATEGIES A company does not set a single price, but rather a pricing structure that covers different items in its line. ... The dynamic pricing strategies available to management are : new-product pricing strategies for products in the introductory stage of the product lift cycle; product-mix pricing strategies for related products in the product mix; price-adjustment strategies that account for customer difference and changing situations; and strategies for initiating and responding to price changes. ... It must decide where to position the product versus competing products in terms of quality and price. The four possible positioning strategies : premium pricing – producing high-quality product and charging highest price; economy pricing – producing lower-quality product, charging a low price; good-value pricing – represents a way to attack the premium pricer; over-charging pricing – overprices the product in relation to its quality. ... a) Market-Skimming Pricing – setting a high price for a new product to ‘skim’ maximum revenues layer by layer from the segments willing to pay the high price; the company makes fewer but more profitable sales. ... It sets price that makes it just worthwhile for some segments of the market to adopt computers containing the chip. As competitors threaten to introduce similar chips, Intel lowers the price to draw in the next price-sensitive layer of customers. b) Market-Penetration Pricing – rather than setting a high initial price to skim off small but profitable market segments, some companies use market-penetration pricing. They set a low initial price in order to penetrate the market quickly and deeply – to attract a large number of buyers quickly and win a large market share. ... Several conditions favour setting a low price. Firstly, the market must be highly price sensitive, so that a low price produces more market growth. ... Finally, the low price must help keep out the competition – otherwise the price advantage may only be temporary. ... 2) PRODUCT-MIX PRICING STRATEGIES The strategy for setting a product’s price often has to be changed when the product is part of a product mix. ... a) Product Line Pricing – setting the price steps between various products in a product line based on cost differences between the products, customer evaluations of different features, and competitors’ prices. This will increase company profits if the cost difference is smaller than the price difference. If the price difference is large, however, customers will generally buy the less advanced products. ... Car companies have to decide which items to include in the base price and which to offer as options. ... However, more recently, the American and European car makers have been forced to follow the example of the Japanese carmakers and include in the basic price many useful items previously sold only as options. c) Captive-Product Pricing – setting a price for products that must be used along with a main product, such as blades for a razor and films for camera.