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Pricing Strategy

The document discusses 8 common pricing strategies used by organizations: 1. Penetration pricing aims to attract customers to new products by initially offering lower prices. This helps the product penetrate the market and attract customers from competitors. 2. Price skimming charges the highest initial price customers will pay, then lowers prices over time as demand from early customers is met and competition enters. 3. Premium pricing sets prices higher than competitors to signal quality and luxury. Brands with strong reputations can charge premium prices. 4. Psychological pricing uses prices just below whole numbers (e.g. $49.99) to seem lower than they are. 5. Bundle pricing sells multiple similar products

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83 views2 pages

Pricing Strategy

The document discusses 8 common pricing strategies used by organizations: 1. Penetration pricing aims to attract customers to new products by initially offering lower prices. This helps the product penetrate the market and attract customers from competitors. 2. Price skimming charges the highest initial price customers will pay, then lowers prices over time as demand from early customers is met and competition enters. 3. Premium pricing sets prices higher than competitors to signal quality and luxury. Brands with strong reputations can charge premium prices. 4. Psychological pricing uses prices just below whole numbers (e.g. $49.99) to seem lower than they are. 5. Bundle pricing sells multiple similar products

Uploaded by

Audrey Iyaya
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Pricing Strategy

Assignment No.2 – FINALS


Discuss at least 8 types of well known pricing strategies that is basically used by
organizations.
1. PENETRATION PRICING
Penetration pricing is a marketing strategy used by businesses to attract
customers to a new product or service by offering a lower price during its initial
offering. The lower price helps a new product or service penetrate the market and
attract customers away from competitors. Market penetration pricing relies on the
strategy of using low prices initially to make a wide number of customers aware of
a new product. The goal of a price penetration strategy is to entice customers to
try a new product and build market share with the hope of keeping the new
customers once prices rise back to normal levels.
2. PRICE SKIMMING
Price skimming is a product pricing strategy by which a firm charges the highest
initial price that customers will pay and then lowers it over time. As the demand of
the first customers is satisfied and competition enters the market, the firm lowers
the price to attract another, more price-sensitive segment of the population.
3. PREMIUM PRICING
Premium pricing occurs when prices are set higher than the rest of the market to
create perceived value, quality, or luxury. If your company has a positive brand
perception and a loyal customer base, you can often charge a premium price for
your high-quality, branded products.
4. PSYCHOLOGICAL PRICING
Psychological pricing is the business practices of setting prices lower than a whole
number. The idea behind psychological pricing is that customers will read the
slightly lowered price and treat it lower than the price actually is. An example of
psychological pricing is an item that is priced 49.99 pesos but conveyed by the
consumer as 49 pesos and not 50 pesos, treating 49.99 pesos as a lower price
than 50.00 pesos.
5. BUNDLE PRICING
Bundle pricing is a type of promotional pricing where two or more similar products
or services are sold together for one price. Bundling is an effective way to upsell
additional products to customers or add value to their purchases. Restaurants,
beauty salons, and retail stores are among the many businesses that apply this
type of pricing strategy.
6. COMPETITIVE PRICING
The competitive pricing strategy sets the price of your products or services at the
current market rate. Your pricing is determined by all other products in your
industry, which helps you stay competitive if your business is in a saturated
industry. You can also decide to price your products above or below the market
rate, as long as it’s still within the range of prices set by all competitors in your
industry.
7. COST PLUS PRICING
Cost plus pricing involves adding a markup to the cost of goods and services to
arrive at a selling price. Under this approach, you add together the direct material
cost, direct labor cost, and overhead costs for a product, and add to it a markup
percentage in order to derive the price of the product. Cost plus pricing can also
be used within a customer contract, where the customer reimburses the seller for
all costs incurred and also pays a negotiated profit in addition to the costs incurred.
8. ECONOMY PRICING
Economy pricing is a volume-based pricing strategy wherein you price goods low
and gain revenue based on the number of customers who purchase your product.
It's typically used for commodity goods, like generic-brand groceries or
medications, that don't have the marketing and advertising costs of their name-
brand counterparts.
Determine its usefulness towards organization goal. Is it properly aligned/match
companies goals and objectives to make it effective. Why?
A pricing strategy is a plan or technique for choosing the most competitive price for a
good or service. It assists you in setting prices while taking customer and market demand
into account in order to maximize profits and shareholder value. Numerous business
considerations, including revenue targets, marketing goals, target markets, brand
positioning, and product features are taken into account by pricing strategies. Additionally,
they are impacted by outside variables like market and economic changes, competitive
price, and consumer demand.
And I believe that companies' goals and objectives are aligned and matched because
they will not be successful or increase their income if they do not have the right pricing
strategy and it is not aligned with their company goals.

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