Pricing methods

Subject : Service Marketing

Batch : 2018-2020

Q : What are the different pricing options available to marketer

Answer :  Price is the value that is put to a product or service and is the result of
a complex set of calculations, research and understanding and risk taking
ability. A pricing strategy takes into account segments, ability to pay, market
conditions, competitor actions, trade margins and input costs, amongst others. It
is targeted at the defined customers and against competitors.
Pricing strategy is a way of finding a competitive price of a product or a service.
This strategy is combined with the other marketing pricing strategies that are
the 4P strategy (products, price, place and promotion) economic patterns,
competition, market demand and finally product characteristic. This strategy
comprises of one of the most significant ingredients of the mix of marketing as
it is focused on generating and increasing the revenue for an organization,
which ultimately becomes profit making for the company. Understanding the
market conditions and the unmet desires of the consumers along with the price
that the consumer is willing to pay to fulfill his unmet desires is the ultimate
way of gaining success in the pricing strategy of a product or a service.
Premium pricing: high price is used as a defining criterion. Such pricing
strategies work in segments and industries where a strong competitive
advantage exists for the company. Example: Porche in cars and Gillette in
blades.

Penetration pricing: 
price is set artificially low to gain market share quickly. This is done when a
new product is being launched. It is understood that prices will be raised once
the promotion period is over and market share objectives are achieved.
Example: Mobile phone rates in India; housing loans etc.
Economy pricing:
 no-frills price. Margins are wafer thin; overheads like marketing and
advertising costs are very low. Targets the mass market and high market share.
Example: Friendly wash detergents; Nirma; local tea producers.
Skimming strategy:
 high price is charged for a product till such time as competitors allow after
which prices can be dropped. The idea is to recover maximum money before the
product or segment attracts more competitors who will lower profits for all
concerned. Example: the earliest prices for mobile phones, VCRs and other
electronic items where a few players ruled attracted lower cost Asian players.
Psychological Pricing
Psychological pricing Strategies is an approach of gathering the consumer’s
emotional respond instead of his rational respond. For example a company will
price its product at Rs 99 instead of Rs 100. The price of the product is within
Rs 100 this makes the customer feel that the product is not very expensive.

Pricing Strategies of Product Line

Products line pricing is defined as pricing a single product or service and
pricing a range of products. Let us take and understand this with the help of an
example. When you go for a car wash you have an option of choosing a car
wash for Rs 200 or a car wash and a car wax for Rs 400 or the entire package
including a service at Rs 600.

Pricing Optional Products

It is a general approach, if the companies decrease the price of a product or a
service they do increase their price for their other available optional services.
Let’s take a very simple and a common example of a budget airline.

Pricing of Captive Products

Captive products have products that compliment the products without which the
main product is of no use or is useless. For example an inkjet printer is of no use
without its cartridge it will not work and have no value and a plastic razor will
have no value without its blades
Pricing for promotions
Promotional pricing is very common these days. You will find it almost
everywhere. Pricing for promoting a product is another very useful and helpful
strategy. These promotion offers can include, discount offers, gift or money
coupons or vouchers, buy one and get one free, etc. to promote new and even
existing products companies do adopt such strategies where they roll out these
offers to promote their products.