11. Pricing Strategies

Market-Skimming pricing

Setting a high initial price for a new product to “skim” maximum revenues layer by layer from segments willing to pay the high price; the company makes fever but more profitable sales.

Market-Penetration pricing

Setting a low initial price to attract a large number of buyers quickly & gain a significant market share.

Product Line pricing

Setting different prices for various products within the same product line based on features, costs or customer perceptions.

Optional Product pricing

Pricing optional or accessory products that can be added to the main product (e.g., car upgrades, extra phone features)

Captive Product pricing

Pricing products that must be used with the main product (e.g., ink for printers)

By-Product pricing

Setting a price for by-products (secondary products) to help offset the costs of disposing of them & make the main product’s price more competitive.

Product Bundle pricing

Combining several products & offering the bundle at a reduced price (e.g., fast food meal deals, software suites)

Allowance

Promotional money paid by manufacturets to retailers in return for an agreement to feature the manufacturer’s products in some way (e.g., advertising allowances, trade-in allowances)

Segmented pricing

Selling a product at 2 or more prices, where the difference isn’t based on cost (e.g., student discounts, senior pricing, location-based pricing)

Psychological pricing

Pricing that considers the psychological impact, such as pricing something at 9,99€ instead of 10,00€ to make it seem cheaper.

Promotional pricing

Temporarily pricing products below the list price, & sometimes even below cost, to increase short-run sales (e.g., holiday sales, flash sales)

Geographical pricing

Adjusting prices to account for the geographic location of customers (e.g., charging more for shipping to remote areas)

• FOB-Origin Pricing: Customer pays shipping from the factory

• Uniform-Delivered Pricing: Same price + freight to all customers, regardless of location

• Zone Pricing: Different prices for different geographic zones

• Basing-Point Pricing: Seller selects a city as a “basing point” & charges all customers freight from that city

• Freight-Absorption Pricing: Seller absorbs all or part of the freight charges to get the desired business

Dynamic pricing

Adjusting prices continually to meet the characteristics & needs of individual customers & situations (common in online retail & airline tickets)

International pricing

Adjusting prices for international markets, considering factors like local economic conditions, laws &competition