CHAPTER 8:

PRICING STRATEGY
PRICE
- Price is the worth that is assigned to a product or service which a consumer
must pay in order to receive it.

IMPORTANCE OF PRICE
1. Profit Margins- the price set for a product or services affects the profit
margin per unit sold.
2. Sales Volume- one of the most noticeable effects of pricing in business is an
increase and decrease in sales volume.
3. Position- price reflects things about the business, the products and service
which create the perceived value.
4. Market Share- the price set for a product and service makes it relatively
competitive in the market place, which affects the share of the market’s quantity.
5. Loss Leaders- various businesses set price for their products or services at
less than cost to obtain customers into their businesses.

PRICING OBJECTIVES
1. Survival- the primary pricing objective of any company is to price its
product or service to the most advantageous in order to survive the
competition.
2. Maximizing the current profits- a lot of companies seek to earn the
greatest amount in profits. In order to maximize their present profits,
companies approximate their demand and supply of goods and services.
3. Capturing huge market share- numerous companies priced their
products and services low to acquire greater market share.
4. Market skimming- is a pricing highly products and services offered by the
companies that utilize innovation, and uses modern technology but later reduce
the price.
5. Product quality leadership- many companies base the price of their goods
and services with the quality perceived by the custom.

SETTING THE PRICE OF A PRODUCT

Setting the price of a product is a continuing process. Companies must
research and study their market landscape regularly and make price
adjustments as a result.
CONSIDERATIONS IN PRICE SETTING:
1. Cost
2. Customers
3. Competition
4. Tiered Pricing
5. Odd Number Pricing

PRICE STRATEGIES
Pricing strategy in marketing is identifying the most advantageous price for a
product.
PRICING STRATEGIES
1. Premium Pricing- pricing is setting a higher price than competitors for a
unique brand with a strong competitive advantage.
Premium pricing is highly effective in the following conditions:
1. Early introduction - Premium pricing can be highly successfully
instituted when a product is first launched to the market.
2. Uniqueness - Small businesses that have inimitable products can make a
distinction of their products with higher prices and a quality reputation.
3. Luxury products - Consumers distinguish that the product is a lavish
product and has remarkably high quality or elite design.
4. Strong barriers to entry - If a company has paid out a big sum of money to
set up its products as premium merchandise, then competitors would have to
use large amount of money to situate their products in similar category.
5. Limited production - The seller can produce uniqueness through restricting
the quantity of products accessible in the marketplace.
6. No substitutes - Companies can make it complicated for competitors to
fake their products through taking tough lawful procedures every time
comparable products come out.
7. Patents - Possessing a patent or copyright on a design or some other
inimitable element of a product is a powerful restriction to other competitors
who might desire to sell the same products.
PRICING STRATEGIES
2. Penetration Pricing- In penetration pricing, the asking price for products
and services is set temporarily low compared to standard price to attract buyers
with the purpose of increasing market share quickly.
3. Economy Pricing- In economy pricing strategy, businesses reduce the costs
related with marketing and production so that product prices can be kept to a
minimum.
4. Price Skimming- Happens when a company sets a temporarily high price
for a product or service particularly during the introductory phase because it
has a substantial competitive advantage.
PRICING STRATEGIES
5. Psychological Pricing- Setting prices a little lower than rounded numbers.
6. Bundle Pricing- In a bundle pricing, companies trade a package or multiple
goods or service for a lower price than they would charge if the customer
purchased all of them individually.
7. Product Line Pricing- is splitting products into several price categories to
form different quality levels in the minds of consumers usually used by retailers.
8. Optional Product Pricing- method is presenting a low-base price to attract
customers but sell expensive add-ons once they start to buy to continue the
likelihood of producing high customer revenues. It is the optional "extra" that
increases the overall price of the product or service.
PRICING STRATEGIES
9. Captive Product Pricing- is offering low price for the core product, but high
prices are set on captive products.
10. Promotional Pricing- is artificially lowering the price of a product or
service to enhance value through time-based scarcity perception. When products
are perceived as scarce, they are more given importance than plentiful ones.
11. Geographical Pricing- is regulating a product's sale price anchored in
location to reflect shipping or satisfy the market-clearing price in that place.
12. Value Pricing- Value-based pricing is a strategy in setting a price based
typically consumers' perceived worth or value of the product or service.