Pricing Strategy

Pricing strategy – definition

What does he business gain from the pricing strategy?

When in the product life cycle could the strategy be employed?

Other than the example provided, name a product/ service that might be priced using he strategy.

Premium pricing – setting a high price for products to give the impression of a high quality product/service.

The impression of a high quality product & high profit & good reputation.

Introduction to saturation

I Phone / Smart phone

Pricing skimming – setting prices at a higher price to recoup development, costs of products – a strategy that can be successful

They get back the development cots of a product, getting the money back quickly

Introduction

X Box / Phones / Tablets

Discrimination pricing – setting different prices for different customers for the same product/servce.  Often occurs in leisure activities.

Increasing target market, groups bring people who might not usually come

Any point in product life cycle

Public transport

Penetration pricing – setting a vry low price in order to gain market share from competitors.  Often used for new products.

More customers than their competitors as their products are cheaper, still gaining a profit and increase sales.

Introduction or decline

Supermarkets

Competitive pricing – pricing at a similar price to competitors therefore competition is based on non-price factors eg customer service.

To get just as many customers as their competitors.  Make customers think about other factors.

Maturity

Supermarkets

Loss leader pricing – setting prices at a lower price to gain market share even if a loss is made on the product.

Lots of customers because they have really cheap products – gain market share and encourages them to buy other products.

Introduction and decline

Supermarkets

Cost plus pricing – adding a fixed mark up on the cost eg 20%

They make a higher profit, forecast how much profit you will make.

Growth / maturity

Any product

Psycholigical pricing – aims to make the customer believe the product is cheaper than it really is eg selling at £9.99 rather than £10 is intended to attract customers looking for `value’

More sales and customers because prices appear lower people will believe its within their budget.

Whole product lifecycle introduction

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