PRICING STRATEGIES - MODULE 4

Market Skimming: pricing something at the high price at release then dropping the price after some time

• 3 conditions:

  • product quality and image must support it’s high price

  • cost of producing at a smaller volume must not outweigh the benefits of charging higher

    • Economies of Scale- producing more costs less per unit/ buying in bulk

  • high barriers to entry

    • should be exclusive, not a lot of sellers can sell it

Marketing Penetration: Pricing something really low after selling the product for some time to make people buy

• 3 conditions:

  • product must be price- sensitive, cheap as possible

  • production and distribution costs must decrease as sales volume increase

  • low price must help keep out competition

Product Mix Marketing Strategies:

• Product Lining Pricing- bigger sizes, high price; more benefits, high price

• Optional product pricing- selling a product with creating more products that can enrich the experience of use of one product

• Captive Product Pricing- you cannot enjoy the main product without buying other products(e.g. you can’t use a Nintendo switch to play games without the SD cards)

• By Product Pricing- By products of main product can also be sold(e.g. you can sell your chicken, chicken egg, chicken feet, and it’s feathers)

• Product Bundle Pricing- selling a lot fo products as a set to make it cheaper than the items individually

Price Adjustment Strategies:

• Allowances- money paid by manufacturers to retailers in return for an agreement to feature the products in some way

• Discounts- straight reduction in price on purchases during a stated period of time or of larger quantities

• Segmented- selling a product or service at two or more prices, where the difference is prices is not based on differences in costs

  • some boulder gyms increase the price during peak hours so that the people will crowd less

• ! Price Sensitive- price is catering to the poorer people

! Instead of making the price at 250, make the price at 249 or 239 to make it seem cheaper.