Pricing Strategy & Pricing Tactics to Be Used for Your Product

One of the most common pricing tactics that companies use is to price their products just a few pennies lower so that the first number of the price is lower. CultureMusicSportsFood&DrinkEntertainmentLifeHomesNewsWeatherShoppingJobsCarsPricingStrategy&PricingTacticstoBeUsedforYourProductSmallBusiness|BusinessPlanning&Strategy|PricingStrategyByReneeO'FarrellHowDoesUnitPricingWork?ListtheFactorstoConsiderWhenSettingaProductPriceWhatIstheDifferenceBetweenUpselling&Downselling?PricingStrategiesforWomen'sBoutiquesHowDoesaPricingStrategyAffectBrandEquity?Thepricingstrategyyourcompanyadopts,whetheritistosellahighvolumeatalowprice,tosellalowvolumeatahighpriceortofallsomewhereinthemiddle,willlikelyemploycertainpricingtactics.Usingpricingtacticscanmakeyourproductseemlessexpensiveandthereforeagreatervalueorcanestablishyourcompany’sproductsasaluxuryitem.CharmPricingOneofthemostcommonpricingtacticsthatcompaniesuseistopricetheirproductsjustafewpennieslowersothatthefirstnumberofthepriceislower.Forexample,ifyouwereusingcharmpricing,youwouldsellyourproductsfor$19.99insteadof$20because$19.99seemslikeitisless.Itpushesyourproductintothe$10-$19.99pricebracketsoitappearstocostmuchlessthan$20.BumpsIntheexampleabove,settingthepriceto$19.99madeitseemlowerfortworeasons.Forone,itdidnotendwith“.00”soitseemssmaller.However,thereisalargerreason–pricebumps.Inthisexample,$20canbeapricebump.Theconceptofpricebumpsiscommonlyappliedtorealestateandvehicles;thepriceyousetputsyourproductinadifferentcategory,justlikewhensomeoneshopsforahomeandlimitshissearchtohomeswithinthe$150,000to$175,000pricerange.However,withpricebumpscomescertainexpectationsthatyouhavetomanage.Youwouldexpectavehiclepricedatmorethan$20,000tohavecertainfeatures;ifyoufailtoprovidethoseexpectedfeatures,itcouldmakeyourproductlessdesirable.Ofcourse,providingfeaturesthatyouwouldnotexpectatacertainpricebump,suchaspayinglessthan$20,000foranewfour-wheel-drivevehicle,candemonstratevalue.AnchoringPricebumpsmayalsoserveas“anchors,”thatis,pricesthatsetabenchmark.Forinstance,whenApplesetthepriceforitsiPodShuffleatunder$50,itopenedupthemarkettoawholerangeofpeoplewhowouldnotthinkthatsomethingpricedunder$50wasexpensive,makingthemmorelikelytopurchasetheShuffle,beitasafirstMP3playerorasanextraone.Conversely,acompanymayopttopriceanitemoverathresholdtodevelopitsstanceasaluxurybrand,suchaswhenarestaurantchargesmorethan$5foradrink.ConsiderationsNomatterwhichpricingtacticyouuseorpurposelydonotuse,youareestablishingyourbasisorcompetitiontoyourcustomer.Shehastoseetherelativevalueofyourproduct,andthepricehastomatchherexpectationsforthatvalue.Withinthis,youstillhavetomakesurethatyouarechargingenoughforyourcompanytooperate.Forexample,asmallretailerwillneverbeabletocompetewithabig-boxdiscounteronprice,soithastoestablishvalue:eitherprestigevalue,themechanismbywhicharetailerlikeRolexcanchargeasmuchforawatchassomecarscost,orrelativevalue,establishingthataconsumershouldcometoyourstoreforhiswidgetsbecauseeventhoughtheycostabitmorethanthoseatTarget,yourscomewithalifetimewarrantyorareofferedinagreaterrangeofsizesandcolors.ReferencesInc;TheABCsofPricing;CharlieGilkey;January2011ResourcesNetMBA:PricingStrategyWriterBioReneeO'Farrellisafreelancewriterprovidingvaluabletipsandadviceforpeoplelookingforwaystosavemoney,aswellasinformationonhowtocreate,re-purposeandreinventeverydayitems.Herarticlesoffermoney-savingtipsandvaluableinsightontypicallyconfusingtopics.O'FarrellisamemberoftheNationalPressClubandholdsadvanceddegreesinbusiness,financialmanagement,psychologyandsociology.RelatedArticlesPricingStrategyUsedDuringSellingWhatPricingStrategyReducestheEmphasisonPriceAsaCompetitiveWeapon?WhatDoesElasticityMeaninaCompany?IceCreamPricingStrategyExplainingPercentMarkupTheDifferencesBetweenValue-BasedPricing&Cost-BasedPricingWhatIsPriceLining?MarketAdaptivePricingVs.CostPlusWhatIsPsychologicalPricing?HowDoesUnitPricingWork?ListtheFactorstoConsiderWhenSettingaProductPriceWhatIstheDifferenceBetweenUpselling&Downselling?1PricingStrategyUsedDuringSelling2WhatPricingStrategyReducestheEmphasisonPriceAsaCompetitiveWeapon?3WhatDoesElasticityMeaninaCompany?4IceCreamPricingStrategy