Pricing Mix Strategies
Pricing Mix Strategies
This presentation will focus on different pricing strategies in
marketing. 1Fixed and variable costsCompetitionCompany
objectivesProposed positioning strategiesTarget group and
willingness to payFactors that Affect Price
There are five factors that are important to remember when
setting a price for a good or service. The first factor to remember
is the fixed and variable costs which are all of the costs faced by
companies. The next factor is competition. What price are
competitors setting? The next factor to remember is company
objectives. The next factor is proposed positioning strategies. And
finally, the last factor is the target group and their willingness
to pay. It would not be smart to set a price that does not fit
within the target group. 2Penetration PricingSkimming
PricingCompetition PricingBundle PricingPremium
PricingPsychological PricingOptional PricingCost Based PricingCost
Plus PricingEconomy PricingCaptive Product PricingPromotional
PricingGeographical PricingProduct Line PricingPricing
Strategies
There are many pricing strategies that marketers use. Those
strategies are captive product pricing, cost based pricing,
penetration pricing, optional pricing, premium pricing,
psychological pricing, promotional pricing, bundle pricing, cost
plus pricing, product line pricing, competition pricing,
geographical pricing, economy pricing, and skimming pricing. We
will now look at each of these pricing strategies in more detail.
3Price set low to gain market share.Once achieved, price is
increased.
A TV company may set a low price to gain subscribers, then
increase the price after the customer base increases. Penetration
Pricing
Penetration pricing is when the prices are set low in order to
gain market share. Once the market share has reached a desired
value, the price of the product or service will be increased. TV or
TV satellite companies usually set their prices low in order to
gain subscribers and increase the price after the customer base has
increased. 4No frills, low price.Marketing and promotion cost at
minimum.
Generic Food Brands Economy Pricing
Economy pricing is just basically a no frills or tricks, low
price. The marketing and promotion cost is at a minimum for these
products. A great example of this is generic food brands such as
the pictures featured. 5Initial high price to attract
customers.Slowly lowers the price.Objective: Skim profits of the
market layer by layer.
Game ConsolesSkimming Pricing
Skimming pricing is when a business or company will set an
initial high price to attempt to attract customers. Overtime, the
price of the product will be lowered. The objective of this pricing
strategy is to obtain the maximum amount of profits from the market
layer by layer. A great example of skimming pricing is video game
consoles like X-Box and PlayStation. When they are released on the
market, the price is high to attract customers. As time progresses,
the price of the consoles begins to drop. 6Expects consumer to
respond emotionally, rather than rationally. Understand that
consumers use price as an indicator of many factors.
Selling an item at $99 instead of $100.Psychological Pricing
Psychological pricing is used when a company expects the
customer to respond emotionally rather than rationally. The company
must be understanding that consumers use price as an indicator of
many factors such as value, quality, and product life expectancy.
The most common example of this is when something is sold for an
amount ending in an odd amount such as 9. For example, a company
may choose to sell a truck for $10,999 rather than $11,000. This
one dollar price difference is very meaningful to pricing. 7Range
of products or services and the pricing reflects the benefits of
parts of the range.
Product Line Pricing
Product line pricing occurs when there is a range of products or
services. The pricing will reflect the benefits of parts of the
range. For example, a basic kindle is $79, a touchscreen kindle is
$99, and the touchscreen tablet-like kindle fire is $199. The price
of the kindle reflects the benefits of the product. 8Companies
offer extras that are optional. The extras will increase the price
overall.
Car salesmen offer extra features while also increasing the
price of the car.Optional Product Pricing
Optional product pricing occurs when companies offer extras that
are optional, but the extras will increase the overall price of the
product. One of the most common examples of optional product
pricing occurs at car dealerships. When purchasing a car, the buyer
is given many options of additional features that will incur an
increase in the overall price. Extra features are touch screen
systems, navigation systems, power windows, push to start engines,
sunroofs, moon roofs, and much more. 9Products are sold with
complements. Sold at premium price, because consumers have no
choice. Captive Product Pricing
Captive product pricing occurs when products are sold with
complements. This means that a product is sold in a pack with items
that complement that product. These products are sold at a premium
price because consumers have no choice of rejecting the
complementary items. Some examples of this are printers being sold
with ink cartridges and razors being sold with refillable
cartridges. Can you think of any products that you purchase that
may have used the captive product pricing strategy?10Sellers
combine several products into one package.Usually used at the end
of a product life cycle.
Video GamesProduct Bundle Pricing
Product bundle pricing occurs when sellers combine several
products into one package and sell that package at one price.
Product bundle pricing usually occurs near the end of the products
life cycle, but this is not the case for all bundles. The two
bundles featured contain a gaming system and a game. Product bundle
pricing occurs a lot around the holidays in order to promote
certain products. 11DiscountsMoney-Off VouchersBuy One, Get
OnePromotional Pricing
Have you ever heard of a promo? If you have, this means that you
are familiar with promotional pricing. Promotional pricing is used
in the form of discounts, coupons, or sales.12Notice variations in
price in different parts of the world. Rarity valueShipping
costsGeographical Pricing
Geographical pricing focuses on various parts of the world and
how pricing factors affect that given region. When working with
geographical pricing, one must consider the rarity value of the
product and the shipping costs to that area. Could you guess where
the product is being produced in the map featured? If so, why do
you think it is in that region?13Price set high to reflect the
exclusiveness of the product. Premium Pricing
Premium pricing occurs when the prices are set high to reflect
the exclusiveness of the product. Great examples of this are
Porsche, Louis Vuitton, and Apple products. Can you think of any
products that are priced using the premium pricing strategy?
14Setting a price in comparison with competitors. Choice to
increase or decrease price.
Price Matching Guarantees Competition Pricing
Competition pricing is when a price is set in comparison with
competitors. When using this strategy, a business or company is
given the choice to increase or decrease the price of a product.
Many large stores, like Walmart and target, offer price match
guarantees. This means that they will adjust the price of the their
product if a competitor has the same product at a different price.
15Cost Based PricingCost of production and distribution taken into
account. Decide on a mark-up.
Common when businesses are in a volatile industry. Cost Plus
PricingAdds a percentage to costs as profit margin.
EX: An item costs $100 to produce an item and the firm adds a
20% profit margin, so the selling price would be $120.
Cost based pricing is when the cost of production and
distribution are taken into account and then a mark-up is decided
on. This type of pricing is common when a business is in a volatile
industry. Volatile means that something is liable to change rapidly
and unpredictably. Cost plus pricing adds a percentage to costs as
the profit margin. An example of this is when an item costs $100 to
produce and the firm adds a 20% profit margin so the selling price
of the item would be $120.
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