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The Pricing Approaches High Price If the company is setting a high price for their products it should be backed up with a strong promotional effort.Called Market skimming pricing Advantage the company initially sets high prices to skim revenues layer by layer from the marketDisadvantage it may lead to lower demandMajor consideration in setting Price New product pricing strategies:

If a company is setting a new product there two options:

Set a low price company is setting for a low price it should also be backed up by strong promotional supportCalled Market penetration pricingAdvantage the company can penetrate the market quickly and deeply to attract a large number of buyers and capture a large market share in the processDisadvantagerevenues may be filled by more substantial demand Market Skimming Market Penetration Selling price P400 per unitP250 per unit Demand1,000 unit1,600 unitsRevenue P400,000P400,000Marketing Skimming versus Marketing Penetration Pricing Different between the two options are:In skimming pricing is to make a swift return on investment by offering product at a high price In penetration pricing the objective is to capture a large market share by attracting buyers through low prices.

The low pricing is more beneficial to a firm over a long period of time.the companies that are adopting the skimming pricing strategy need to be caution of their marketing program and ensure that they justify the high price they charge for their products to win customers confidence, support and eventually loyalty. An alternative pricing strategies is establishing a relationship between the price and the quality of the product to come up with 4 possible strategies:Selling a High-Quality product at a high price (premium pricing strategy)Selling High-Quality product at low price ( good value pricing strategy)Selling Low-Quality product at high price( overcharging pricing strategy)Selling a low-Quality product at a low price (economy pricing strategy)

HIGHLAWHIGHPremium Strategy Overcharging Strategy LOWGood Value Strategy Economy strategy The Price- Quality Matrix Quality Price

Cost-Based Pricing Strategy Cost based pricing has 3 pricing approaches:

The shapes have a hyperlink11Value- based pricing strategyit considers the buyers perception value as the main ingredient in pricing.PRODUCTCOST PRICEVALUECUTOMER COST- BASED PRICING STRATEGY VALUE- BASED PRICING STRATEGY CUTOMER VALUEPRICECOST PRODUCTCompetition- Based Pricing strategy Two kinds of Competition- Based Pricing strategy

Going Rate Pricing Sealed- bid Pricing Going rate & sealed bid have hyperlink16The company determines a number of possible bids.The company computes for the profit that it will earn under each scenario.The company estimates the probability of winning the contact under the different bids.The company computes for the expected profit under each bid, and The company chooses the bid they yields the highest expected profit. Profit Method Five steps Product- Mix Pricing Strategy

There are two pricing approach under price- adjustment strategies:

Price- Adjustment strategy

Segmented PricingDiscount PricingDiscount & Segmented have hyperlink

23Discount pricingSegmented pricingConditions to make segmented pricing effective The market must be segmentable and the different segments must show different degrees of demand.Competitors must not undersell the company in the segment being charged the high price.The cost of segmenting and watching the market must never exceed the extra income obtained from the price different.The practice should not lead to customer resentment and will. The segmented pricing must be legal