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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. . .