Define what a pricing strategy is and why it is important to marketers.
Explain the following types of pricing strategies: differential pricing, new-product pricing, product-line pricing, psychological pricing, professional pricing, and promotional pricing. Provide an example of when each might be selected.
Answer
When selling a product or service, a company can employ a range of pricing tactics.
Senior executives must first analyses the company's price position, pricing segment, pricing capabilities, and competitor pricing reaction strategy before determining the most successful pricing strategy.
Price is significant to marketers because it reflects their evaluation of the value customers see in a product or service and their willingness to pay for it.
Customers' perceptions of a product or service are influenced by pricing.
Differential pricing
Differential pricing indicates that some customers pay less than others for the same product.
This strategy is applicable to services, admission fees, restaurants, and products.
Differential pricing is designed to reduce controversy and sentiments of unfair treatment among those who do not qualify for the discount.
Example
When clients purchase multiple items from a store, the price of each item is frequently reduced.
For example, a supermarket retailer may price 50 cents for a box of pasta that would normally cost $1.00 if purchased in bulk.
Customers receive a free dessert or meal after having their cards punched 10 times.
New product pricing
As a product progresses through its life cycle, its pricing strategy is likely to alter.
This is referred to as "New Product Pricing."
When a company releases a new product, they are faced with the task of setting prices for the first time.
Example
Here's a simple example of value-based pricing.
When you take a tiny child to a petting zoo, she expresses an interest in feeding the goats.
In the goat food dispenser, you put a quarter.
There's the cost of goat food — around two cents — to consider.
Product line pricing
In order to generate distinct perceived quality levels in the minds of consumers, product line pricing entails the segmentation of goods and services into cost categories.
Price lining is another term for product line pricing, however they both refer to the same thing.
Example
A way of pricing distinct products at a limited number of prices is known as price lining.
This method is simple to implement, and it allows businesses to better estimate their customer markets and profitability.
The Dollar Store is a great example of price lining because the majority of the items sold there are $1.
Psychological pricing
Psychological pricing is a pricing strategy that employs a variety of approaches to create a psychological or subconscious effect on customers.
It combines price and sales methods.
The idea is that people will read the slightly lower price and treat it as if it were a reduced price.
Example
An item priced at $3.99 but conveyed to the customer as $3.99 rather than $4.00 is an example of psychological pricing.
Professional pricing
The Certified Pricing Professional (CPP) credential is the gold standard for advanced pricing knowledge and competence.
The CPP qualifies you as a true price specialist because it is the only globally recognised pricing qualification.
Example
The professional services pricing procedure that follows is the "how" of pricing plan implementation on a day-to-day basis.
It's a strategy that companies may include into their present sales and marketing processes to deploy a value-based approach and boost profits.
Promotional pricing
Promotional pricing is a marketing approach in which a company temporarily lowers the price of a product or service in order to attract new customers.
Customers may develop acclimated to lower prices (a process known as "price orientation"), or they may stock up during a promotional time.
Example
BOGOF (buy one, get one free), seasonal sales promotions, discounts, and flash sales are the most popular types of promotional pricing.
Multi-buys, loyalty programmes, conditional offers, free delivery, and gifts are all options depending on your pricing goals and business strategy.
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