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Benefits and limitations of pricing methods - Coggle Diagram
Benefits and limitations of pricing methods
Cost plus
benefits
Simple
A set proportion for all products
Limitations
Customers expectations and local differences are ignored if the same proportion is utilized for all products.
Competitive pricing
Benefits
Price matches customers expectations.
Limitations
In terms of price, the company gains nothing.
Psychological pricing
Benefits
Encourages higher priced sales.
Limitations
This strategy does not easily persuade modern clients.
For both the consumer and the firm, simple, whole-unit pricing ($100) is more convenient.
Penetration pricing
Benefits
Aids a company's sales in competitive markets.
Limitations
Customers may expect a low price to remain low after it is set.
The low pricing may clash with the entire brand image, causing sales to suffer.
Price skimming
Benefits
Assists the company in making the most profit possible early in the product's life cycle.
Can assist in the creation of a premium/high-quality image.
Limitations
For certain customers, the price may be too expensive.
Due to low sales, a price drop early in the product life cycle might harm the brand's reputation.
Promotional pricing
Benefits
In the short term, it is possible to enhance sales.
Can help to raise brand awareness.
Can prevent customers from purchasing competitive goods if they have already stocked up on a company's goods.
Limitations
Profit margins are reduced for the duration of the promotion.
Customers are not permitted to purchase the product unless it is "on sale".
It's possible that the brand's image will suffer.
Dynamic pricing
Benefits
Customers may object to paying various rates at different times, and they may refuse to buy if they do not believe they are getting the greatest bargain.
Limitations
Assists in maximizing revenue.
Can ensure that a company's capacity is appropriately utilized by cutting prices.