Pricing Strategy
Price is the total amount that a consumer pays for a product or service.
Companies tend to determine the optimum price for their product or service based on the market share, positioning & competition and the perceived value of the product.
The same products can employee different pricing strategies over the period of time.
Different forms of pricing strategy are as follows:
Premium Pricing
• Product/Service is unique.
• Perceived Benefit of the product is high.
• High competitive advantage must exist with the marketer.
• E.g. Ferrari, iPhone, Gucci
Penetration Pricing
• Setting the price low with the goal of attracting customers and gaining market share.
• Price is raised once market share is gained.
• Typical in Indian Aviation Industry.
Predatory Pricing
• Selling at extremely cheap rate to quickly increase the market share.
• Works for service based industries like Telecom, Insurance, Banking, IT etc.
• Law may curtail & punish if found it anti-competitive.
Geographical Pricing
• The price variation in different parts of the world can be a business strategy or forced upon by the local market.
• It usually occurs due to difference in PPP, taxes, duties etc.
• Example is Gasoline & Alcohol.
Price Skimming
• Charge a high price initially because product is unique and you have a competitive advantage.
• Advantage is not sustainable and eventually price is reduced due to enhanced competition.
• Flagship Smartphones & other electronics.
Psychological Pricing
• Marketer wants to entice customer into thinking that product is cheaper.
• Product is available at Rs 199/- instead of Rs 200.
Dynamic Pricing
• Dynamic pricing, also referred to as surge pricing, demand pricing, or time-based pricing is a pricing strategy in which businesses set flexible prices for products or services based on current market demands.
• It is a common strategy adopted by the transportation, tourism and hospitality industries.
Captive Product Pricing
•If products have complements, the core products are generally offered at a lower price while the captive products which are necessary to use the core product are priced highly. •E.g. Razors and Blades, Printers and Cartridges.
Bundle Pricing
• Price bundling is combining several products or services into a single comprehensive package for an all-inclusive reduced price.
