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Pricing: Approaches and strategies - Coggle Diagram
Pricing: Approaches and strategies
Cost-based pricing (product driven)
Ignores demand and competition
Popular pricing technique because:
Sellers more certain about cost than demand
Simplifies pricing
Competition is minimized
More fair to both buyers and sellers
Adding a standard markup to cost
Competition based pricing
Going rate-pricing
May price at the same level, above, or below the
competition
Value-based pricing (customer-driven)
Measuring perceived value can be
difficult.
Consumer attitudes toward price and quality have shifted during the last decade
Uses buyers’ perceptions of value rather
than seller’s costs to set price
Introduction of less expensive versions of
established brands has become common.
New-Product Pricing Strategies
Market penetration pricing
Setting a low initial price for a new product in order to “penetrate” the market quickly and deeply.
Attract a large number of buyers and win a larger market share
Conditions to use
Price sensitive markets
Production/distribution costs must fall as sales volume increases
Must keep out competition & maintain its low price position or benefits may only be temporary.
Market skimming pricing
Setting a high price for a new product to skim maximum revenues in the targeted market
Results in fewer, but more profitable sales
Condition to use
Product's quality and image must support higher price
Costs of producing the product in small numbers should not cancel the advantage of higher prices
Competitors shouldn’t be able to enter market easily
Product Mix-Pricing Strategies
Captive-product pricing (Pricing products that must be used with the main product)
By-product pricing (Pricing low value by products to get rid of them and make the main product’s price more competitive)
Optional-product pricing (Pricing optional or accessory
products sold with the main product
Product bundle pricing ( Combining several products and offering the bundle at a reduced price)
Product Line Pricing (Involves setting price steps between various products in a product line based on
Customer evaluations of different features
Competitors’ prices
Cost differences between products
Price Adjustment Strategies
Psychological Pricing
Promotional Pricing
Segmented Pricing
Geographical Pricing
Discount and Allowance Pricing
International Pricing