1. Pricing Products: Pricing strategies

2. NEW PRODUCT PRICING STRATEGIES
The companies, introducing a new product and setting prices for the first time, can choose between two broad strategies –
1. Market-Skimming Pricing
2. Market-Penetration Pricing

3. Market-Skimming Pricing
Setting a high price for a new product to skim maximum revenues layer by layer from the various segments willing to pay the high price.
The company makes fewer but more profitable sales.
As initial sales slow down, and as competitors threaten to introduce similar products, the company lowers the price to draw in the next price-sensitive layer of customers.

4. Applicable under certain conditions –
The product’s quality and image must support its higher price.
Enough buyers must want the product at that price.
Competitors should not be able to enter the market easily and undercut the high price.

5. Market-Penetration Pricing
Setting a low price for a new product in order to attract a large number of buyers quickly and win a large market share.
Applicable under certain conditions –
The market must be very price-sensitive
The low price must help keep out the competition and the penetration price must maintain its low-price position.

6. PRICE-ADJUSTMENT STRATEGIES
Discount and allowance pricing:
Cash discount
Quantity discount
Functional discount (trade discount)
Seasonal discount
Allowances

7. Segmented pricing
Segmented pricing is to sell a product/ service at two or more prices, where the differences in prices is not based on differences in costs.
Customer-segment pricing
Product-form pricing
Location pricing
Time pricing

8. Psychological pricing
Psychological pricing is a pricing approach that considers the psychology of the prices and not simply the economy.
Price used to say something about the product.
When consumers cannot judge quality of the product because they lack the information or skill, price becomes an important quality signals.

9. Promotional pricing
With promotional pricing, companies will temporarily price their products below list price, sometimes even below cost, to increase short-run sales.

10. Geographical pricing
A company price its products differently for customers located in different part of the country or world to cover the higher shipping costs.

11. International pricing
The price that a company should charge in a specific country depends on many factors ---
Costs
Consumer perceptions and preferences
Marketing objectives
Economic conditions
Competitive situations
Laws and regulations
The wholesaling and retailing systems

12. Initiating price changes
Initiating price cuts:
Several situations may lead a firm to consider cutting its price –
Excess capacity
Falling market share in the face of strong price competition

13. Initiating price increases:
Several factors may lead a firm to consider increasing its price –
Cost inflation
Over demand

14. Price changes Competitor reactions Buyer reactions

15. 2. Responding to price changes
Hold current price; continue to monitor competitor’s price
Has competitor cut price? No
Yes
Will lower price negatively affect our market share and profits?
Reduce price No
Raise perceived quality
Yes No
Improve quality and increase price
Can/should effective action be taken?
Yes
Launch low-price
“fighting brand”