PRICING

STRATEGY
What is Price??

• The amount of money expected, required or given in payment for

something.
What is Pricing Strategy
• A pricing strategy is an approach taken by businesses to decide how
much to charge for their goods and services. The interaction between
margin, price, and selling level are given specific consideration while
pricing products. Therefore, it’s important and complicated to design a
proper pricing plan that ensures business success.
Factors affecting Pricing Strategy
PRICING STRATEGIES
• 1) Market Skimming Pricing is a pricing approach in which the
producer sets a high introductory price to attract buyers with a strong
desire for the product and the resources to buy it, and then gradually
reduces the price to attract the next and subsequent layers of the
market.
• Eg:- Play-station, DVD, etc
2)VALUE PRICING
• Value-based pricing is a strategy for pricing goods or services that
adjusts the price based on its perceived value rather than its
historical price. The strategy is used when the purchasing decision is
emotionally-driven or when scarcity is involved.
3) LOSS LEADER PRICING
• The strategy works with the sole aim of building a customer base by
selling a few products at a zero or negative margin initially and
then generating recurring revenue by selling other
products or complementary products to the same set of customers
shortly. This strategy is common in the razor industry.
4) PSYCHOLOGICAL PRICING
• Psychological Pricing is one of the marketing strategies using
which the prices of the product are kept in such a way that it
appeals more to the consumers of the product or services.
5) PRICE DISCRIMINATION PRICING
• Price discrimination is a selling strategy that charges customers
different prices for the same product or service based on what the
seller thinks they can get the customer to agree to. In pure price
discrimination, the seller charges each customer the maximum price
they will pay.
6) PENETRATION PRICING
• Penetration pricing is a pricing strategy that is used to quickly gain
market share by setting an initially low price to entice customers
to purchase. This pricing strategy is generally used by new entrants
into a market.
7) COST-PLUS PRICING
• A cost-plus pricing strategy, or markup pricing strategy, is a simple
pricing method where a fixed percentage is added on top of the
production cost for one unit of product (unit cost). This pricing
strategy ignores consumer demand and competitor prices.
8) TARGET PRICING
• In target pricing the selling price for a product is determined first.
Based on the insights from the marketing department and other market
data, the most competitive price that the customers would be willing to
pay is fixed as a selling price.
9)DESTROYER PRICING
• Destroyer pricing is a low-pricing strategy to drive competitors out of
the market. After being expelled, the company can act as a monopolist
in the market. Other terms for this strategy are undercutting and
predatory pricing. The dominant firm charges below-average variable
costs, which makes it operate at a loss.
10) GOING RATE(PRICE LEADERSHIP)
• Going rate pricing is when a business sets the price of its product or
service based on the market price. This pricing strategy is often used
to price similar products, like commodities or generic items, that have
little variation in design and function.
• Eg:- Metals