Impact of pricing strategy on sales performance

Different Types of Pricing Strategy

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Different Types of Pricing Strategy · Premium Pricing Strategy · Penetration Pricing Strategy · Economy Pricing Strategy · Price Skimming Strategy · Psychological ... CultureMusicSportsFood&DrinkEntertainmentLifeHomesNewsWeatherShoppingJobsCarsDifferentTypesofPricingStrategySmallBusiness|BusinessPlanning&Strategy|PricingStrategyByJimWoodruffUpdatedMarch04,2019ConceptsofDiversifiedIndustryWhyDoCompaniesKeepanUnprofitableProductLine?WhatAreSomeofthePricingStrategyConsiderationsforaNewProduct?FactorsContributingtotheSuccessofaBusinessHowDoCompetitiveForcesShapeStrategy?Companiesmustuseeffectivepricingstrategiestoselltheirproductsinacompetitivemarketplacesotheycanmakeaprofit.Businessmanagersneedtoconsiderarangeoffactors,suchaspricesofferedbycompetitors,costsforproductionanddistribution,productimagepositioninginthemindsofconsumers,anddeterminingthedemographicsofpotentialbuyers.PremiumPricingStrategyBusinessesuseapremiumpricingstrategywhenthey'reintroducinganewproductthathasdistinctcompetitiveadvantagesoversimilarproducts.Apremium-pricedproductispricedhigherthanitscompetitors.Premiumpricingismosteffectiveinthebeginningofaproduct'slifecycle.Smallbusinessesthatsellgoodswithuniquepropertiesarebetterabletousepremiumpricing.Tomakepremiumpricingpalatabletoconsumers,companiestrytocreateanimageinwhichconsumersperceivethattheproductshavevalueandareworththehigherprices.Besidescreatingtheperceptionofahigherqualityproduct,thecompanyneedstosynchronizeitsmarketingefforts,itsproductpackagingandeventhedecorofthestoremustsupporttheimagethattheproductisworthitspremiumprice.PenetrationPricingStrategyMarketersusepenetrationpricingtogainmarketsharebyofferingtheirgoodsandservicesatpriceslowerthanthoseofthecompetitors.Marketerswanttogettheirproductsoutinthemarketsothattheproductsraiseconsumerawarenessandinducebuyerstotrytheproducts.Althoughthislowerpricestrategymayresultinlossesforthecompany–atfirst–butmarketersexpectthatafterachievingastrongermarketpenetrationthattheywillraisepricestoamoreprofitablelevel.EconomyPricingStrategyAneconomypricingstrategysetspricesatthebareminimumtomakeasmallprofit.Companiesminimizetheirmarketingandpromotionalcosts.Thekeytoaprofitableeconomypricingprogramistosellahighvolumeofproductsandservicesatlowprices.Largecompanies,suchasWalmart,areabletotakeadvantageofthislow-pricestrategy,butsmallbusinesseswillhavedifficultysellingenoughproductsatlowpricestostayinbusiness.PriceSkimmingStrategyPriceSkimmingisastrategyofsettingpriceshighbyintroducingnewproductswhenthemarkethasfewcompetitors.Thismethodenablesbusinessestomaximizeprofitsbeforecompetitorsenterthemarket,whenpricesthendrop.PsychologicalPricingStrategyMarketersusepsychologicalpricingthatencouragesconsumertobuyproductsbasedonemotionsratherthanoncommon-senselogic.Thebestexampleiswhenacompanypricesitsproductat$199insteadof$200.Eventhoughthedifferenceissmall,consumersperceive$199asbeingsubstantiallycheaper.Thisisknownasthe"left-digiteffect."BundlePricingStrategyBusinessesusebundlepricingtosellmultipleproductstogetherforalowerpricethaniftheywerepurchasedseparately.Thisisaneffectivestrategytomoveunsolditemsthataresimplytakingupspace.Bundlingalsocreatestheperceptioninthemindoftheconsumerthathe'sgettingaveryattractivevalueforhismoney.Bundlepricingworkswellforcompaniesthathavealineofcomplimentaryproducts.Forexample,arestaurantcouldofferafreedessertwithanentreeonacertaindayoftheweek.OldervideogamesthatarereachingtheendoftheirlivesareoftensoldwithaBlu-raytosweetenthedeal.Companiesneedtostudyanddeveloppricingstrategiesthatareappropriatefortheirgoodsandservices.Certainpricingmethodsworkforintroducingnewproductswhereasotherstrategiesareimplementedformatureproductsthathavemorecompetitorsinthemarket.ReferencesIntuitQuickbooks:6DifferentPricingStrategies:WhichIsRightforYourBusiness?Entrepreneur:10PricingStrategiesThatCanDrasticallyImproveSalesEDUCBA:10MostImportantPricingStrategiesinMarketing(Timeless)MarketingTeacher:PricingStrategiesBusinessDevelopmentBankofCanada:HowtoPriceYourProduct:5CommonStrategiesResources"MarketingWiththeEndinMind";LinGrensing-Pophal;2005WriterBioJamesWoodruffhasbeenamanagementconsultanttomorethan1,000smallbusinesses.Asaseniormanagementconsultantandowner,heusedhistechnicalexpertisetoconductananalysisofacompany'soperational,financialandbusinessmanagementissues.Jameshasbeenwritingbusinessandfinancerelatedtopicsforwork.chron,bizfluent.com,smallbusiness.chron.comande-commercewebsitessince2007.HegraduatedfromGeorgiaTechwithaBachelorofMechanicalEngineeringandreceivedanMBAfromColumbiaUniversity.RelatedArticlesPricingStrategyMethodstoInfluenceCompetitiveBehaviorExamplesofPositioningStrategyinMarketingNew-ProductPricingVs.Market-PenetrationPricingDifferentTypesofBusinessStrategiesWhatisPremiumPricingStrategy?WhatAreConsumerCues?HowDoesaPricingStrategyAffectBrandEquity?HowtoPutFilesFromWindowsMovieMediaPlayerOntoaniPodClassicMarketingStrategiesofFirmsConceptsofDiversifiedIndustryWhyDoCompaniesKeepanUnprofitableProductLine?WhatAreSomeofthePricingStrategyConsiderationsforaNewProduct?1PricingStrategyMethodstoInfluenceCompetitiveBehavior2ExamplesofPositioningStrategyinMarketing3New-ProductPricingVs.Market-PenetrationPricing4DifferentTypesofBusinessStrategies

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