Pricing Strategies

Price

• Price is the third P in the marketing mix.

Pricing Strategies and Definitions

• Pricing strategies dictate how a product or service is priced.

Penetration Pricing

• A strategy involving setting prices artificially low to gain market share.
• Once market share increases, the price is raised.

Skimming Pricing

• Initially charging a high price before gradually lowering it to broaden market reach.
• Suitable when a firm has a considerable competitive edge.
• The high price attracts new competitors, leading to inevitable price drops with increased supply.

Competition Pricing

• Setting prices based on competitors' prices, rather than costs or demand.
• Possible actions: price lower, the same, or higher than competitors.

Product Line Pricing

• Reviewing and setting prices for a company's multiple products in coordination.
• Maximizes sales of complementary, rather than competitive, products.
• Considers the impact of one product's price on others.

Bundle Pricing

• Offering multiple products or services together in a package at a lower price than if purchased separately.

Premium Pricing

• Setting a product's price higher than similar products.
• Aims to create the perception of higher value.

Psychological Pricing

• Setting prices slightly below rounded numbers.
• Relies on the belief that customers don't round up and perceive prices as lower.
• Customers process prices left to right, potentially ignoring the last digits.

Optional Pricing

• Involves cross-selling products alongside a basic product.
• The basic product has limited features and a low price.
• It can be enhanced through optional or accessory products at a premium.

Cost Plus Pricing

• Adding a markup to the cost of goods and services to arrive at a selling price.
• Includes direct material, direct labor, and overhead costs, plus a markup percentage.

Cost Based Pricing

• Adding a fixed sum or percentage of the total cost to the product's cost to determine the selling price.
• Income or profit is added to the cost of the product.

Value Based Pricing

• Prices rely primarily on consumers' perceived value of the product or service.

Promotion

• Promotion is the fourth "P" in the marketing mix.
• It encompasses activities used to communicate the product, brand, or service to the user.
• Aims to create awareness, attract consumers and induce them to prefer the product over others.

Promotional Mix Elements

• Advertising is a key component.
• Public Relations (PR) involves unpaid articles featuring a company.
• Personal Selling occurs when a salesperson sells to a client.
• Sales Promotions are initiatives to increase sales, usage, or trials.
• Direct Marketing is a method of presenting information without advertising middlemen.

People

• People constitutes the fifth "P" in the marketing mix.
• Includes the team, staff, audience, and advertisers involved directly or indirectly with the product or service.

Packaging

• Packaging represents the sixth "P" in the marketing mix.
• Packaging refers to the exterior presentation of a product and its presentation to customers.

Positioning

• Positioning is a process marketers employ to create an image in the minds of a target market.

Steps of the Positioning Process

• Confirm understanding of market dynamics.
• Identify competitive advantages.
• Choose competitive advantages that define the niche.
• Define the positioning strategy.
• Communicate and deliver on the positioning strategy.