Different Pricing Strategies in Marketing

Adopted by Companies

Pricing is most important part of a company marketing mix strategies. Pricing can help or hinder a
company products or services sale. Every company sell either a product or a service, and all companies
have to choose the price to sell their products or services at, which is difficult choice than most people
realize.
Pricing can be defined as the process of determining what a company will receive from its customers in
exchange for the products or services it sells. It is very important for a company to manage its pricing
strategies in allegiance with the requirements of industry in which company operates, the markets in
which company supply its products, the customers with whom company transact and the objectives that
company wants to achieve. Ultimately every company exists to make money, so the general aim of
pricing strategies is to maximize the profit that the company can make.

Different Types of Pricing Strategies

Following are some types of pricing strategies that can be adopted by a company to achieve its goals in
accordance with its business nature.

New Product Pricing Strategies

Many companies design new products or often some sorts of services first time in the market. In this
case company adopts two type of pricing i.e. Market skimming price and Market penetrating price. But
companies face some difficulties to set the price for its products and services for the first time.  Top level
management of the company considers many factors and decides either to go with marketing skimming
price or market penetrating price. I am discussing both in detail.

1. Market Skimming Prices strategy

Skimming pricing strategy adopted by a company which enters into the market with a new and
innovative product. Price skimming allows a company to market its new or innovative product at a
reasonably high price, as initially company does not have competitors’ concerns. However, skimming
pricing is a short- term pricing strategy because competitors gradually enter in the market with their
substitute products. Then company needs to initial high price of the product needs adjustment in
allegiance with the make adjustments allegiance with the market conditions, for maintaining its market
share.
The best example is manufacturers of digital watches who used a skimming approach in the 1970s. After
entrance of other manufacturers in the market as watches were produced at a lower per unit cost,
other marketing strategies and pricing approaches  are implemented by initial manufacturers.
Conditions for Skimming Prices are
Quality & image of product must support its price
Good number of buyers should be willing to buy the product
Cost of production should be low so company can generate revenue after offering high prices.
There should be no competitors who can broke down the high prices

2. Market Penetration Pricing Strategy

Penetration pricing strategy is adopted by a company who is heading towards the launch of a new
product that is already available in the market. it gets difficult for company to secure a reasonable
market share as customer loyalty, once developed, it is difficult to exploit. So penetration pricing allows
a company to market its product at such a lower competitive price, through which company can secure
some of the market share and also exploit the loyal customers of its competitors. This strategy is
effective in gaining the market share and helps in attracting a large number of buyers. This approach
was initially used by Sky TV and France Telecom as they offered free telephones or satellite dishes at
discounted or lower rates in order to attract more people for their services.

Conditions for Penetrating Prices are:

1. Competitors must have high price
2. When the sales increases the production & distribution cost must be fall

Other Types of Pricing Strategies in Marketing Adopted by Companies

Premium Pricing Strategy

In Premium Pricing Strategy the company produces a high quality product or unique brand and offers
at a highest price. This pricing strategy is commonly used for luxury items or high end and high value
goods, like expensive jewelry, boats, planes, estates, Savoy Hotel rooms, Cunard Cruises, and first class
air travel. Company can only use this pricing strategy if its product’s value is recognized by customers
(market) as being a premium or luxury good.

Economy or Generic Pricing Strategy

This pricing strategy treats generic or economy-type brands with a low price but for quality products.
Company approach to economy pricing strategy must be rooted in a low cost structure, minimal
promotion, minimal features, but still solid (not extravagant) benefits. In economic pricing strategies
usually adopted when the customers of the company or brand are those who seek quality (quality
conscious) and those who seek lower price (prices conscious).