Types of Pricing Strategies in Marketing

Various Types of Pricing Strategy Examples in Marketing Management

What are the pricing strategies in marketing? What is economy pricing in marketing? Critical among the four elements of a marketing mix is pricing. The others are place, product and promotion. Pricing strategy is described as a way of getting your products off the shelf by increasing sales through the use of a suitable and attractive pricing method which will promote sales of the product or commodity.

What is the strategy of pricing? These strategies are very important for your company if you want to maximize sales and make profits in business. Depending on a company’s unique objectives and goals, companies may adapt to use different strategies for pricing. In this article we are going to take a look at different pricing strategies in business marketing a new or existing company may choose to use in order to promote sales of her products or services.

What are the different methods of pricing?

Premium Pricing

For a unique product which has the distinct competitive edge above other products in the market, premium pricing strategy is used to make the price of the product or service higher than other product in the market. In other words new product in the market that completely fill a consumer need as no other product in the same consumer line can, will tend to have a higher price compared to the other products.

Premium pricing can proof to be an invaluable strategy for companies who are going into the market with a new and innovative product that has a competitive edge above other products and want to maximize revenue during the early stages of the product life circle.

Penetration Pricing

This new product pricing strategy is designed to get a hold of the market share by the entering the market with a relatively low price as compared to competition. As the name implies, a company coming into the market with a new product will definitely meet competition from existing products that satisfy the same consumer line of need.

Therefore to penetrate the market and capture market share the new company may have to lower their price to attract consumers to patronize their product or service. On the downside, penetration pricing may result to losses for the company, It will inevitably create awareness for the company and the new product or service by word of mouth and customer referrals amid a market crowd category.

Economy Pricing

Economy pricing is a strategy adapted by some giant companies such a Wal-mart, and Aldi who have used this pricing strategy for a long time. In this pricing strategy, the price of the product or service is kept relatively low for a long time. The company makes very little profit from sales of her products. Profit is only made on turnover. So, higher sales results in a higher turnover. This strategy is usually applied for a segment of population that is price sensitive.

Price Skimming

Business or companies whose products or services have a significant competitive advantage over other companies or products tend to use this strategy when ushering the new product into the market. In this strategy price of the produce is made significantly higher compared to other similar products in the market. This is to enable the company maximize revenue on the early life of the product before other competitors could come up with similar products or alternatives.

Psychological Pricing

This is a pricing strategy that is regularly used by marketers in selling their products. In this strategy a price is chosen by the marketer which looks psychologically lower than the known price. For example $99 looks psychologically lower than $100. So the marketers play on the psychology of the consumer to make the consumer feel their products are cheaper than other similar products in the market.

Product line Pricing

This is a pricing strategy in which a particular product or service is sold at a particular price and also a range of products are sold as a unit at a particular price. To understand this better we are going to use the following examples. A barbers shop may charge $10 for Shaving only, $30 for hair cut only and $35 for the combined service of shaving and haircut.

A car wash will charge you $200 to wash your car and $200 to polish it. But you can get a combined package of washing and polishing for $500. So in this case the consumer will feel he is lowering cost by going for the combined package instead of paying for washing and polishing separately.
Optional Products Pricing

This is the pricing strategy where companies lower the price of their product or service and increase the price of their optional products which most times are mandatory. Again we are going to explain this by use of examples. The ticket of a low budget airline is cheap, but you will be made to pay extra for optional services like taking a window seat or for more baggage space.

Conclusion

To conclude this article, let’s take a quick recap of the points discussed above. We have seen that marketing solely depends on 4Ps. This is the most critical success factor for sales of products or services. A company’s pricing of products or services have to be very tactfully and carefully done so that you do not under price yourself out of the market or have a sales glut by over pricing your products relative to competition. You can check the different types of pricing strategies in marketing mix to see which suites your product or service well.

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