Definition of 'Pricing Strategies' - The Economic Times

Apart from the four basic pricing strategies -- premium, skimming, economy or value and penetration -- there can be several other variations on these. Nifty17,511.30-5.55IDBIBank53.955.3MiraeAssetEquitySavingsFundDirect-Growth16.84% InvestNowMiraeAssetHybridEquityFundDirect-Growth17.11% InvestNowMarketWatchSearch+HomeETPrimeMarketsNewsIndustryRISEPoliticsWealthMFTechJobsOpinionNRIPanacheETNOWMoreBusinessNews›Definitions› Marketing ›PricingStrategiesCategoriesGlossaryEconomyEquityInsuranceBudgetMarketingMutualFundSpaceTechnologyTestingHumanResourceFinanceSecurityRealEstateCommoditySportsSoftwareDevelopmentAnalyticsEntertainmentHRTransportationAstronomyShippingMathematicsRetailEducationSuggestanewDefinitionProposeddefinitionswillbeconsideredforinclusionintheEconomictimes.comMarketingPREVDEFINITIONPricingOptionsApartfromthefourbasicpricingstrategies--premium,skimming,economyorvalueandpenetration--therecanbeseveralothervariationsonthese.ReadMoreNEXTDEFINITIONProductAproductistheitemofferedforsale.Aproductcanbeaserviceoranitem.Itcanbephysicalorinvirtualorcyberform.ReadMoreDefinitionof'PricingStrategies'Definition:Priceisthevaluethatisputtoaproductorserviceandistheresultofacomplexsetofcalculations,researchandunderstandingandrisktakingability.Apricingstrategytakesintoaccountsegments,abilitytopay,marketconditions,competitoractions,trademarginsandinputcosts,amongstothers.Itistargetedatthedefinedcustomersandagainstcompetitors. Description:Thereareseveralpricingstrategies: Premiumpricing:highpriceisusedasadefiningcriterion.Suchpricingstrategiesworkinsegmentsandindustrieswhereastrongcompetitiveadvantageexistsforthecompany.Example:PorcheincarsandGilletteinblades. Penetrationpricing:priceissetartificiallylowtogainmarketsharequickly.Thisisdonewhenanewproductisbeinglaunched.Itisunderstoodthatpriceswillberaisedoncethepromotionperiodisoverandmarketshareobjectivesareachieved.Example:MobilephoneratesinIndia;housingloansetc. Economypricing:no-frillsprice.Marginsarewaferthin;overheadslikemarketingandadvertisingcostsareverylow.Targetsthemassmarketandhighmarketshare.Example:Friendlywashdetergents;Nirma;localteaproducers. Skimmingstrategy:highpriceischargedforaproducttillsuchtimeascompetitorsallowafterwhichpricescanbedropped.Theideaistorecovermaximummoneybeforetheproductorsegmentattractsmorecompetitorswhowilllowerprofitsforallconcerned.Example:theearliestpricesformobilephones,VCRsandotherelectronicitemswhereafewplayersruledattractedlowercostAsianplayers. Thesearethefourbasicstrategies,variationsofwhichareusedintheindustry.PREVDEFINITIONPricingOptionsApartfromthefourbasicpricingstrategies--premium,skimming,economyorvalueandpenetration--therecanbeseveralothervariationsonthese.ReadMoreNEXTDEFINITIONProductAproductistheitemofferedforsale.Aproductcanbeaserviceoranitem.Itcanbephysicalorinvirtualorcyberform.ReadMore5ForcesAnalysisOfTheEnvironmentThefiveforcesmodelofanalysiswasdevelopedbyMichaelPortertoanalyzethecompetitiveenvironmentinwhichaproductorcompanyworks. Description:Therearefiveforcesthatactonanyproduct/brand/company: 1.Thethreatofentry:competitorscanenterfromanyindustry,channel,function,formormarketingactivity.Howbestcanthecompanytakecareofthethreatofnewentrants? 2EndorsementsEndorsementsareaformofadvertisingthatusesfamouspersonalitiesorcelebritieswhocommandahighdegreeofrecognition,trust,respectorawarenessamongstthepeople.Suchpeopleadvertiseforaproductlendingtheirnamesorimagestopromoteaproductorservice.Advertisersandclientshopesuchapproval,orendorsementbyacelebrity,willinfluencebuyersfavourably.Forexample,SachReferencePriceReferencepriceisalsoknownascompetitivepricing,becauseheretheproductissoldjustbelowthepriceofacompetitor’sproduct.Referencepriceisthecostatwhichamanufacturerorastoreownersellsaparticularproduct,givingaheftydiscountcomparedtoitspreviouslyadvertisedprice. Description:Referencepricing,insimpleterms,isknownasthatpricewhichuserscomparewithLossLeadersLossleadersarehighvolume,highprofilebrandsorproductsthataresoldbyretailerswiththeintentiontoattractcustomersintotheirpremises,withthehopethatthosecustomerswillendupbuyingothergoodsaswell,onceinside.Examplescouldbesteeplydiscountedelectronics,orconsumergoods,orgarments.Azeropercentloanforcarsisalossleaderexampleforthedealer. DescriAmbientAdvertisingAmbientAdvertisingisaboutplacingadsonunusualobjectsorinunusualplaceswhereyouwouldn’tusuallyexpecttohaveanadvertisement. Description:Ambientadvertisingevolvedasaconceptbecauseithasalastingimpactonthemindsofconsumerswhichmakesitmoreeffective.Ambientadvertisingisallaboutcreativity,andhoweffectivelytheadvertiserisabletocommunicatethemessageConspicuousConsumptionConspicuousconsumptionisthepracticeofpurchasinggoodsorservicestopubliclydisplaywealthratherthantocoverbasicneeds. Description:Theword'Conspicuous'heremeanslavishorwastefulspending.Thiskindofspendingisgenerallymadebypeoplewhohaveconsiderableamountofdisposableincometospendongoodsandserviceswhicharenotnecessary,butaremoreluxuriousinnature. MarketConcentrationMarketconcentrationisusedwhensmallerfirmsaccountforlargepercentageofthetotalmarket.Itmeasurestheextentofdominationofsalesbyoneormorefirmsinaparticularmarket.Themarketconcentrationratioismeasuredbytheconcentrationratio. Description:Themarketconcentrationratiomeasuresthecombinedmarketshareofallthetopfirmsintheindustry.‘MarketShare’isusCashCowsCashCowisoneofthefourcategoriesundertheBostonConsultingGroup'sgrowthmatrixthatrepresentsadivisionwhichhasabigmarketshareinalow-growthindustryorasector.Itisreferredtoanassetorabusiness,whichoncepaidoff,willcontinuegivingconsistentcashflowsthroughoutitslife. Description:ACashCowisametaphorusedforabusinessoraproduct,whichexhibitsStrategicBusinessUnitAstrategicbusinessunit,popularlyknownasSBU,isafully-functionalunitofabusinessthathasitsownvisionanddirection.Typically,astrategicbusinessunitoperatesasaseparateunit,butitisalsoanimportantpartofthecompany.Itreportstotheheadquartersaboutitsoperationalstatus. Description:AstrategicbusinessunitorSBUoperatesasanindependententity,butithaRebrandingRebrandingistheprocessofchangingthecorporateimageofanorganisation.Itisamarketstrategyofgivinganewname,symbol,orchangeindesignforanalready-establishedbrand.Theideabehindrebrandingistocreateadifferentidentityforabrand,fromitscompetitors,inthemarket. Description:Thereareseveralreasonsforacompanytogoforrebranding.OneprominentfactoristTrendingDefinitionsDebtfundsReporateMutualfundGrossdomesticproductDataminingAdvertisingProductMonopolyCryptographyDepreciationDiggGoogleBookmarksStumbleUponRedditNewsvineLiveBookmarksTechnoratiYahooBookmarksBlogmarksDel.icio.usApnaCircleMailthisDefinitionMySavedDefinitionsSigninSignupChooseyourreasonbelowandclickontheReportbutton.ThiswillalertourmoderatorstotakeactionNameReasonforreporting:FoullanguageSlanderousIncitinghatredagainstacertaincommunityOthersYourReasonhasbeenReportedtotheadmin.DiggGoogleBookmarksStumbleUponRedditNewsvineLiveBookmarksTechnoratiYahooBookmarksBlogmarksDel.icio.usApnaCircleMailthisDefinitionMySavedDefinitionsSigninSignupChooseyourreasonbelowandclickontheReportbutton.ThiswillalertourmoderatorstotakeactionNameReasonforreporting:FoullanguageSlanderousIncitinghatredagainstacertaincommunityOthersYourReasonhasbeenReportedtotheadmin.