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Pricing Strategies
How real-world companies price
their products.
Abraham Olaobaju and Billy Sahota
Price Skimming
•This is a method used when a company introduces a new
product (especially when it is a new technology).
•T...
So therefore…... Price skimming can
be used when:
● Demand is must be relatively inelastic.
● Large production cost saving...
Penetration Pricing
•This sort of pricing strategy is used by companies
that wish to enter an existing and competitive
mar...
So therefore……… Penetration
pricing can be used when:
● Demand is expected to be highly elastic.
● Large decreases in cost...
Geographical Pricing
•This strategy is used when companies find out that the
cost of living in some markets are high. So t...
Pricing In apparel Industry
•Apparel industry creates a fierce price
competition among some brands and an equally
fierce b...
Budget Shoppers
● Many consumers seek low prices when shopping
for apparel. Serving this segment can yield
significant sal...
Value Shoppers
● Value shoppers are not willing to sacrifice quality for
extremely low prices, but they also are not willi...
Luxury Shoppers
● In the luxury tier of the market, consumers' price sensitivity
often is more closely correlated with a b...
Conclusion
● The apparel industry involves a lot of economic topics
we talked about in class.
● Tradeoffs, Opportunity cos...
Sources and references
● Smallbusiness.chron.com/pricing-strategies-2730.html
● http://www.netmba.com/marketing/pricing/
●...
how real-world companies price their products.
how real-world companies price their products.
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how real-world companies price their products.

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very informative for those who wish to know more about how firms and industries prices their goods.

Published in: Economy & Finance
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how real-world companies price their products.

  1. 1. Pricing Strategies How real-world companies price their products. Abraham Olaobaju and Billy Sahota
  2. 2. Price Skimming •This is a method used when a company introduces a new product (especially when it is a new technology). •The main goal of the company is to establish a high price for the good and selling it to customers who are less price sensitive.The amount received from the sale of this good to cover the cost of producing and advertising it is known as Total Revenue(P x Q).Skimming is a strategy used to pursue the objective of profit maximization.
  3. 3. So therefore…... Price skimming can be used when: ● Demand is must be relatively inelastic. ● Large production cost savings are not expected at high output production. ● The company does not have the resources to finance the large capital expenditures necessary for a high quantity of the product to be produced with initially low profit margins.
  4. 4. Penetration Pricing •This sort of pricing strategy is used by companies that wish to enter an existing and competitive market. A competitive market is a market with many buyers and sellers trading identical products so that each buyer and seller is a price taker.The goal of the company in this case is to maximize the quantity of the good sold by reducing the price.
  5. 5. So therefore……… Penetration pricing can be used when: ● Demand is expected to be highly elastic. ● Large decreases in cost of production is expected as output increases. ● The product is of the nature of something that can gain mass appeal fairly quickly. ● There is a threat of impending competition.
  6. 6. Geographical Pricing •This strategy is used when companies find out that the cost of living in some markets are high. So they decide to move to does areas with the aim to increase Total revenue •Consequently, pricing can become extremely complicated, so the company may need to decentralize marketing and finance departments on a more regional basis. That way each region can track product sales and make pricing changes as needed.
  7. 7. Pricing In apparel Industry •Apparel industry creates a fierce price competition among some brands and an equally fierce brand-image competition among others. •This creates a trade off between some companies about weather to improvise a high price or a low price.
  8. 8. Budget Shoppers ● Many consumers seek low prices when shopping for apparel. Serving this segment can yield significant sales volume at the expense of lower per-unit profitability. ● Customers in this segment are willing to sacrifice quality for affordability and are less likely to be loyal to specific brands.
  9. 9. Value Shoppers ● Value shoppers are not willing to sacrifice quality for extremely low prices, but they also are not willing to pay more than apparel is worth simply for a popular brand logo. ● Consumers in this segment look for clothing and accessories that will last several years or more, making the durability of materials a prime concern.
  10. 10. Luxury Shoppers ● In the luxury tier of the market, consumers' price sensitivity often is more closely correlated with a brand's image rather than inherent product quality or market value. ● Apparel products are closely tied with self-expression and social status in consumers' minds, so consumers in this segment are often more concerned with the social image of their apparel than its durability of the quality of materials.
  11. 11. Conclusion ● The apparel industry involves a lot of economic topics we talked about in class. ● Tradeoffs, Opportunity cost, Rational Thinking, Marginal changes and incentives. ● Generally, all industries engaging in productive activities follow to ten principles of economics. ● From the decision making of a firm to produce more or less of a product (people face trade-offs) to the strategies used by firms to change people's incentives to buy more or less goods.
  12. 12. Sources and references ● Smallbusiness.chron.com/pricing-strategies-2730.html ● http://www.netmba.com/marketing/pricing/ ● "How Much Do Consumers Spend on Apparel?" U.S. Bureau of Labor Statistics. U.S. Bureau of Labor Statistics, n.d. Web. 03 Dec. 2014. ● "Pricing Strategies for the Apparel Industry." Small Business. N.p., n.d. Web. 03 Dec. 2014.

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