2. What is pricing strategy?
The method companies use to price their products or
services.
The price can be set to
maximize profitability for each unit sold or from the market
overall
defend an existing market from new entrants,
to increase market share within a market
to enter a new market.
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4. Factors affecting pricing strategies
1. Customers
Consumers are very sensitive to the
price change of a product regardless
of economic and social class.
Products are
Price Elastic
Durable goods and services
Luxury goods and services
Price Inelastic
Essential goods
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5. Factors affecting pricing strategies
2. Competition
How competitors price and sell their products
will have an effect on a firm’s pricing
decisions.
Today as many products sold online,
consumers can compare the prices of many
merchants before making a purchase
decision.
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6. Factors affecting pricing strategies
3. Cost
a. Product cost
Cost related to
Product development and
testing / R& D
Product packaging
Employee salaries and benefits
Factory overheads
Promotion and distribution of
goods and services
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7. Factors affecting pricing strategies
3. Cost
b. Economy and Government
Laws and Regulations
This includes the economic and
social environment, currency and
interest rates and unemployment
levels.
These factors affect cost of selling
and pricing decisions
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9. Penetration Pricing
The price charged for products
and services is set artificially low
in order to gain market share.
Once this is achieved, the price
is increased.
An extreme form of penetration
pricing is called predatory
pricing
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11. Price Skimming
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The price charged for products
and services is high because the
company has a substantial
competitive advantage.
However, the advantage tends
not to be sustainable. The high
price attracts new competitors
into the market, and the price
inevitably falls due to increased
supply.
12. Premium Pricing
High price is used as a defining
criterion.
The high pricing of premium
product is used to enhance
and reinforce a product's luxury
or high quality image
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13. Competition Pricing
Competitive pricing
consists of setting the
price at the same level
as one’s competitors.
This method relies on the
idea that competitors
have already
thoroughly worked on
their pricing.
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14. Product Line Pricing
Where there is a range of products
or services the pricing reflects the
benefits of parts of the range.
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15. Psychological Pricing
This approach is used
when the marketer
wants the consumer to
respond on an
emotional, rather than
rational basis.
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16. Cost Plus Pricing
Cost-plus pricing is a
straightforward and
simple way to arrive at a
sales price by adding a
markup to the cost of a
product
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17. Cost-based pricing
Cost-based pricing
involves setting prices
based on the costs for
producing, distributing
and selling the product.
Also, the company
normally adds a fair rate
of return to compensate
for its efforts and risks.
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18. Optional Product Pricing
Pricing of optional or accessory
products along with a main
product. In many cases, you
can buy optional or accessory
products along with the main
product.
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20. Bundle Pricing
The act of placing several
products or services together
in a single package and
selling for a lower price than
would be charged if the items
were sold separately. The
package usually includes one
big ticket product and at
least one complementary
good
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