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“Pricing Products: Pricing Strategies”
Presented By : Maria Pirwani
Presented to: Ma’am Amber Raza
Dated: 4th . April.2011
New Product Pricing Strategies:
What are the essential strategies to price their product?
Market Skimming Pricing
Market Penetration Pricing
Market Skimming Pricing:
The word skimming means “ Being on the surface”.
Setting a high price for a new product to “skim” revenues layer-by-layer from those willing to pay the high price.
Company makes fewer, but more profitable sales.
Market Skimming Pricing: Example:
Market Penetration Pricing:
The word penetration means “Going within the Market”
Setting a low initial price in order to “penetrate” the market quickly and deeply.
Can attract a large number of buyers quickly and win a large market share.
It may be useful if the product will launch into a new market.
Market Penetration Pricing:
To quickly penetrate the market, the company launches the product at relatively low price (P1), expecting to sell quantity Q1, and generate revenues equal to P1 times Q1 (the area of the shaded box). The penetration strategy capitalizes on the downward sloping demand curve since the company can pick the price and, within some reasonable bounds, optimize the resulting short-run sales quantity
Market Penetration Pricing: Example:
Product Mix Pricing Strategies:
Product Line Pricing
Optional Product Pricing
Captive Product Pricing
By Product Pricing
Product Bundle Pricing
Product Line Pricing:
Involves setting price steps between products in a product line based on cost differences between products and customer perceptions of value.
Optional Product Pricing :Pricing optional or accessory products sold with the main product (e.g., ice maker with the refrigerator).
Captive Product Pricing:
Pricing products that must be used with the main product.
For E.g.:Mobile Phone Battery Memory Card Chip Laptop Charger
By Product Pricing :
Pricing low-value by-products to get rid of them.
For Example:
Coal tar is a by-Product of the process of obtaining gas from coal.
Product Bundle Pricing:
Pricing bundles of products sold together (software, monitor, PC, and printer)
Price Adjustment Strategies:
Discount and allowance pricing
Segmented pricing
Psychological pricing
Promotional pricing
Geographical pricing
Dynamic pricing
International pricing
Price Adjustment Strategies: Discounts
Cash
Quantity
Functional
Seasonal
Allowances
Trade-in
Promotional
Price Adjustment Strategies:
Segmented pricing:
Selling a product or service at two or more prices, where the difference in prices is not based on differences in costs.
Types:
Customer-segment
Product-form
Location pricing (Different Location different Pricing)
Time pricing
Price Adjustment Strategies:
Psychological pricing:
Considers the psychology of prices and not simply the economics.
Consumers usually perceive higher-priced products as having higher quality.
Consumers use price less when they can judge the quality of a product by examining it or recalling experiences.
Psychological Pricing:
Price Adjustment Strategies:
Promotional pricing:
Loss leaders
Special-event pricing
Low-interest financing
Longer warranties
Free maintenance
Discounts
Geographical pricing:
FOB-origin pricing
Uniform-delivered pricing
Zone pricing
Basing-point pricing
Freight-absorption pricing
Price Adjustment Strategies:
Dynamic pricing:
Adjusting prices continually to meet the characteristics and needs of individual customers and situations.
International pricing:
Adjusting prices for international markets requires consideration of many factors.
(For e.g.: Food Industry )
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Enough for today. . .
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