1.Identify five pricing strategies being effectively used by retail organization.

1. Pricing at a Premium
With premium pricing, businesses set costs higher than their competitors. Premium pricing is often most effective in the early days of a product’s life cycle, and ideal for small businesses
that sell unique goods.
Because customers need to perceive products as being worth the higher price tag, a business must work hard to create a value perception. Along with creating a high-quality product,
owners should ensure their marketing efforts, the product’s packaging and the store’s décor all combine to support the premium price.

2. Pricing for Market Penetration

Penetration strategies aim to attract buyers by offering lower prices on goods and services. While many new companies use this technique to draw attention away from their competition,
penetration pricing does tend to result in an initial loss of income for the business.
Over time, however, the increase in awareness can drive profits and help small businesses to stand out from the crowd. In the long run, after sufficiently penetrating a market, companies
often wind up raising their prices to better reflect the state of their position within the market.

3. Economy Pricing
Used by a wide range of businesses including generic food suppliers and discount retailers, economy pricing aims to attract the most price-conscious of consumers. With this strategy,
businesses minimize the costs associated with marketing and production in order to keep product prices down. As a result, customers can purchase the products they need without frills.

While economy pricing is incredibly effective for large companies like Wal-Mart and Target, the technique can be dangerous for small businesses. Because small businesses lack the sales
volume of larger companies, they may struggle to generate a sufficient profit when prices are too low. Still, selectively tailoring discounts to your most loyal customers can be a great way
to guarantee their patronage for years to come.

4. Price Skimming
Designed to help businesses maximize sales on new products and services, price skimminginvolves setting rates high during the introductory phase. The company then lowers prices
gradually as competitor goods appear on the market.
One of the benefits of price skimming is that it allows businesses to maximize profits on early adopters before dropping prices to attract more price-sensitive consumers. Not only does
price skimming help a small business recoup its development costs, but it also creates an illusion of quality and exclusivity when your item is first introduced to the marketplace.

5. Psychology Pricing
With the economy still limping back to full health, price remains a major concern for American consumers. Psychology pricing refers to techniques that marketers use to encourage
customers to respond on emotional levels rather than logical ones.
For example, setting the price of a watch at $199 is proven to attract more consumers than setting it at $200, even though the true difference here is quite small. One explanation for this
trend is that consumers tend to put more attention on the first number on a price tag than the last. The goal of psychology pricing is to increase demand by creating an illusion of enhanced
value for the consumer.

2.Identify any three brands which you feel are not correctly priced. Suggest your pricing
strategy. Justify your answer.

Cost-Plus Pricing

A pricing method in which the selling price is set by evaluating all variable costs a company incurs and adding a markup
percentage to establish the price.
Cost-plus pricing strategy is what people automatically think of when they think of “pricing strategy.”

This is the most basic form of pricing: selling something for more than it costs to make. You add up all of the costs of providing
the service and then add a profit margin on top to represent the value you are giving your customers. In SaaS, the costs might
be product development and design, the companies own SaaS providers, and the costs of the team. Then add a 5%, 10%, or
healthy 20% margin on top for profit.

Calculating price from costs has two main benefits:

1. It’s simple. As long as you know how much your costs are, it’s trivial to work out your price. No market research, no
data analysis, no strategizing. Just some addition and percentages.

2. You will cover your costs. As this is cost-plus pricing, you know that you will be adding a certain margin on top of
your costs as pure profit.

Taking those advantages at face value, cost-plus pricing seems like a great idea and certainly a good starting point, with little
overhead and definite profits.

Yet, cost-plus pricing is anything but a sure win. You won’t necessarily know all your costs, and therefore can’t know if you’re
going to cover your costs. Your initial costs might include only hosting and some development, but as you grow you’ll have to
factor in sales, marketing, and a number of other previously unknown costs. You can’t change your prices to account for every
new hire, which means your profits will take a hit.

Also, costs fluctuate over time. If a SaaS provider is using value-based pricing and has changed their prices, you can’t
constantly change the price of your product to maintain the same margin. That might work for a gas station, but it won’t work for
a SaaS company. Again, profits take a hit.
This is what happens when you use cost-plus pricing:

In this example, the company calculates costs, and then

adds a healthy 15% margin on top. This works well for a few months, until some unexpected costs crop up. Then the margin is
cut to 5% and then 0%, where the company is only breaking even. Then all it takes is for one of their own SaaS suppliers to
raise prices and they are losing money on every sale.

The Big Problem With Cost-Plus Pricing:

Customers don’t care about cost, they care about value.

You have no idea how much it costs for Starbucks to make your Frappuccino. You have no idea how much it costs for Honda to
make your Accord. The price of these items is tied to the value they represent to you, not their internal cost. Sure, Starbucks
and Honda are pricing their products over what it costs to make them, otherwise they’d be in trouble, but how much over is not
determined by the cost of the coffee beans or the engine parts.

For SaaS in particular, the unit cost of delivering one account can be very low. It is the value that your customers will get out of
using your product that really matters to them, not how much you paid your developers.

Competitor-Based Pricing

A pricing method that utilizes competitor prices as a benchmark, rather than setting a price based on company costs or
customer value.
For a SaaS company starting out in a new industry, competitor-based pricing strategy will seem the logical way to go. Unsure of
the initial value of your product, and not wanting to go too high or too low, it seems obvious that you should look at the other
companies selling similar products to decide your own price point.

Again, calculating price from competitors has two main bonuses:

1. Simplicity. By spending 30 minutes on competitors’ sites finding all their pricing information you can have a “pricing
strategy.” It’s also unlikely to go wrong. By placing yourself in the middle of the pack, you’ll be anchoring yourself for
any future customers and they won’t think your product is too cheap or too expensive.

2. It might be close. If you’re in a competitive market, pricing for the companies involved should be close to what the
market can reasonably sustain.

But the biggest downside of competitor-based pricing should be obvious. You don’t have your pricing strategy, you
have their pricing strategy. Your company exists to offer customers something different to what is already on the market. You
are offering more value and a better product, otherwise you shouldn’t be building it.
The moral of the competitor-based story is look, but don’t touch. You want to know where your competitors are pricing their
products so that you’re in the same ballpark, but they should not be guiding your decisions.

The Big Problem With Competitor-Based Pricing:

Customers don’t care about your competitors, they care about their value.

As before, this is missing the point for your customers. Instead of focusing on what you can give them and how you can put
together the right features and plan for them at the right price, you are offering them something that they could literally get
elsewhere.

If a potential customer is on your site, it is because they are interested in what you have to offer. If it’s just a regurgitation of
what they have already seen elsewhere, then they will just use the original instead.

Value-Based Pricing

Basing a product or service's price on how much the target consumers believes it is worth.
Price Intelligently Dictionary

This could easily be called “Customer-Based Pricing” because that is effectively what it is. Instead of looking inwardly at your
own company, or laterally towards your competitors, with value-based pricing strategy you look outward. You look for pricing
information from the people who are going to make a decision depending on your price: your customers.

Three great reasons to base your pricing on customer value:

1. Willingness to pay. This is the main reason you have to go out and ask your potential customers the value they see
in your product. You need to know what customers will actually pay for your product. Competitor-based pricing does
this in a roundabout way. If they are willing to pay $100 for your competitor, then they must be willing to pay $100 for
your product as well. But this misses the fundamental point that your product should be different to your competitors.
It should offer more value, and therefore priced differently.

2. Build the best product. Pricing also isn’t just about the number on the page. It is about how you package and offer
your selection of products and features, and to whom. This approach to pricing will help you understand what your
customers truly want, and what features should be developed over time. Once you have developed your minimal
viable product, your features and product updates should be driven by consumer demand.

3. You get to know your customers. By placing a premium on the opinions of your customers, you are focusing on the
people who will be making the buying decisions. They are the ones that will eventually be deciding whether your
pricing and packaging is correct. If not, they won’t be buying.

The downside: all this takes time, and is the basis for quantifying your buyer personas. You have to be dedicated to finding out
about your customers and your product to perform value-based pricing effectively. It’s also not going to be 100% reliable. With
price sensitivity measurements and feature analysis you are only going to get approximations of the right pricing, packaging,
and positioning for your product.

But this is still much closer to the truth than using just costs or competitors to set your price. It’s also based on your product and
your value, so it gives a much more truthful representation of where your pricing should be set.

When you start using value-based pricing, amazing things can happen with your profit:

With value based pricing, two things are different. Firstly, you can start
at a higher price point if you have shown that there is a willingness to pay among your customers. Secondly, you can raise
prices as you add more value to your product and find out more about your customers. This example has an aggressive pricing
strategy, with two raises within a year. But this is entirely possible in SaaS. You should definitely be re-evaluating your pricing
strategy every 6 months, and if there is room to raise prices you should.
Your customers care about value - and nothing else

Each of these pricing strategies has its place in business. If you’re running a gas station, you’re probably cost-plus pricing. If
you are in the ultra-competitive retail space, pricing in line with competitors will be close to the price the market can sustain.

But in SaaS, the only viable option is value-based. Your SaaS company exists to offer value to your customers. By finding out
how much they are willing to pay for your product and what features they want to see you develop, then you will be able to not
only give customers what they want, but you’ll also be able to attract and retain these customers better. All while making more
profit.

3.You are launching a new brand of customized breakfast cereal. Develop your pricing plan in
accordance with your product portfolio.

1. Define Your Target Audience

Understand your target audience. This is critical because the language, channels and information you use to communicate with
and appeal to one demographic may not be as effective with another. Clearly defining your target audience gives you direction
in your marketing, facilitates more consistency in your messaging and allows you to authentically connect with your customers.
- Megan Shroy, Approach Marketing

2. Know How To Reach Your Audience

Understand the target audience and how to reach them effectively, both with the ad and mentally. Get in the mind of your target
audience and understand where the best place to reach them is and how they will interpret your ad. Then cater your marketing
plan accordingly. - David Kley, Web Design and Company

3. Know The Problem You're Solving

Having a deep understanding of the challenge it's solving and who it is for is crucial. It's surprising how often this is not
thoroughly thought through. Always stay focused on your "who" and "why." Test it with your personas, talk to them about it,
and know it is something that will fulfill an unmet need first. - Debbie Williams, SPROUT Content

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4. Understand The Buying Journey

The buying process forms the foundation of all marketing and sales activities. You need to have an intimate understanding the
buyer's pain points, where they get their information and who influences the purchase. Specific events may even trigger a
purchase. Customers have different expectations on how they will engage with you depending on where they are in the buying
process. - Lisa Allocca, Red Javelin Communications

5. Secure Your Online Identity

In today's world, we have seen numerous cybersquatters try to take advantage of clients who did not secure their domain name,
trademark, social media accounts, etc. It is critical to secure all these before launching anywhere. Oftentimes your domain name
and other critical marketing vehicles can be held for a very expensive price – and having to get attorneys involved is never
cheap! - Duree Ross, Durée & Company

6. Validate Your Product

Make a sale and earn your first dollar as validation to build the product or service – even before it's built. If people won't buy the
product or service based on a pitch, they probably won't buy the product or service when it exists. An easy way to do this is to
develop a landing page. Run ads. See if anyone clicks the "Buy Now" button. If so, you've got validation. - Brett
Farmiloe, Markitors

7. Know Your Competition And Be Different

We see many "Me Too" brands popping up that want to ride the trend wave and cash in on others fast-growing successes.
Instead of following this knee-jerk reaction, look to what makes you different. Figure out your brand differentiators and in some
cases recalibrate to fill the void, not follow the trend. With every great brand idea there was a first to market; aim to be the
leader and innovate. - Taja Dockendorf, Pulp and Wire

8. Make Sure It Hasn't Been Done Before

Seems like an elemental principle in theory but I am always surprised to see people seeking our help to pursue a "great idea"
that has been done before. Research the market for products and services that may be similar to what you're offering.
Sometimes your idea may be better, but if it's been done before, we typically discourage our clients from reinventing the wheel.
- Ricardo Casas, Fahrenheit Marketing

9. Create A Free Trial Or Demo

Creating a free trial or product demo is a critical stage for any product or service because you want to get as much feedback as
possible before the official launch. You also want users to experience it themselves to see how your product or service works.
Understanding if your product or service can deliver its expectations in the marketplace can determine its success or failure. -
Solomon Thimothy, OneIMS

10. Lay Out A Comprehensive Strategic Plan

Every brand should engage in a deliberate and thorough strategic planning process before launching any product or service.
This includes multiple things such as evaluation of the marketplace/competition, SWOT, determining ROI, how to measure
success and communications planning. - Brian Sullivan, Sullivan Branding

11. Get Everyone On The Same Page

The entire company should be unified across all channels, whether it's go-to-market, marketing, launch messaging or customer
support. Ensuring customers have the best experience possible with your company and its product or solution is critical for
long-term success. - Cathy Atkins, Metis Communications

12. Create Brand Voice Guidelines

After you have established a strong brand, you must create guidelines for the brand’s voice and tone. Don’t enter the market
without knowing who you are and how you want to interact with the world. Consistency is key for a brand, so you want to set
every employee on the team up for success when it comes to broadcasting messages on behalf of the brand. - Chapin
Herman, Herman-Scheer

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and advertising agencies. Do I qualify?

13. Offer Early Use Incentives

You want to create a buzz around your product before its launch. One of the best ways to do this is to offer discounts for
preorders, free first-time uses, and beta participation rewards that entice users to buy upon launch. This is awesome product
promotion, too. No one expects a product to be perfect in beta, so test, gather feedback and refine! - Kristopher
Jones, LSEO.com

14. Keep Testing It

Launching a new product or service isn't easy. The one thing every brand should do beforehand is test it; test it until it breaks
and then test it some more. Collecting feedback and insight will help you get closer to delivering the experience you intended.
And of course, you've also got to get all of your marketing materials together, too! That includes landing pages, social media
accounts, etc. - Chi Zhao, Hokku PR

15. Know What You Don't Know

In my experience, many who launch products are good at something but not all things. Before you launch, understand your
limitations and either hire or more commonly outsource the skills you need, both immediately and when things start to take off.
Rapid success can lead to failure if you haven't thought through this first. You don't want to be solving problems you don't
understand on the fly. - Kelli Masilun, Concentric

16. Know Your Story

Understand your story so well that you can tell it to anyone: media, new customers, brands you can co-market with, and more.
If you can’t clearly say who you are, what you do, why you do it and what inspired you, you will lose anyone who could help you
build it. Great PR people are great translators and storytellers. Use them to ensure your story is being told clearly across every
digital channel. - Nicole Rodrigues, NRPR Group, LLC

17. Start Planning The Next Version

Taking a long time to perfect your product before going to market could be the reason it fails. Release it, and start planning the
next model. Keep your eyes wide open for consumer feedback. If you make a mistake, own it and make it right. This way, you're
not only gaining the customers'