7

Pricing Products: Pricing

Strategies

Presented By : Maria Pirwani

Presented to: Maam Amber
Raza
Dated: 4 th . April.2011
New Product Pricing Strategies:

What are the essential

strategies to price their
product?

Market Skimming Pricing

Market Penetration Pricing
Market Skimming Pricing:
The word skimming means
Being on the surface.
Setting a high price for a new
product to skim revenues layer-
by-layer from those willing to pay
the high price.
Company makes fewer, but more
profitable sales.
Market Skimming Pricing:
Example:
Market Penetration
Pricing:
The word penetration means
Going within the Market
Setting a low initial price in order
to penetrate the market quickly
and deeply.
Can attract a large number of
buyers quickly and win a large
market share.
It may be useful if the product will
launch into a new market.
Market Penetration
Pricing:
To quickly penetrate the
market, the company
launches the product at
relatively low price (P1),
expecting to sell quantity
Q1, and generate revenues
equal to P1 times Q1 (the
area of the shaded box).
The penetration strategy
capitalizes on the downward
sloping demand curve since
the company can pick the
price and, within some
reasonable bounds, optimize
the resulting short-run sales
quantity
Market Penetration Pricing:
Example:
Product Mix Pricing
Strategies:
Product Line Pricing
Optional Product Pricing
Captive Product Pricing
By Product Pricing
Product Bundle Pricing
 Product Line Pricing:
Involves setting price steps between products in
a product line based on cost differences between
products and customer perceptions of value.
Optional Product Pricing :
Pricing optional or accessory products
sold with the main product (e.g., ice
maker with the refrigerator).
Captive Product Pricing:
Pricing products that must be used with the main
product.
For E.g.:
Mobile Phone Battery
Memory Card Chip
Laptop Charger
By Product Pricing :
Pricing low-value by-products to get rid of them.
For Example:
Coal tar is a by-Product of the process of
obtaining gas from coal.
Product Bundle Pricing:
Pricing bundles of products sold together
(software, monitor, PC, and printer)
Price Adjustment Strategies:
Discount and allowance pricing
Segmented pricing
Psychological pricing
Promotional pricing
Geographical pricing
Dynamic pricing
International pricing
Price Adjustment
Strategies:
Discounts Allowances
Cash Trade-in
Quantity Promotional
Functional
Seasonal
Price Adjustment Strategies:

Segmented pricing:
Selling a product or service at two or
more prices, where the difference in
prices is not based on differences in costs.
Types:
Customer-segment
Product-form
Location pricing ( Diff erent Location diff erent
Pricing )

Time pricing
Price Adjustment Strategies:
Psychological pricing:
Considers the psychology of prices and
not simply the economics.
Consumers usually perceive higher-
priced products as having higher
quality.
Consumers use price less when they
can judge the quality of a product by
examining it or recalling experiences.
Psychological Pricing:
Price Adjustment Strategies:

Promotional Geographical
pricing: pricing:
Loss leaders
FOB-origin pricing

Special-event pricing
Uniform-delivered
pricing
Low-interest fi nancing
Zone pricing
Longer warranties
Basing-point
Free maintenance pricing
Discounts Freight-absorption
pricing
Price Adjustment Strategies:
Dynamic pricing:
Adjusting prices continually to meet the
characteristics and needs of individual
customers and situations.
International pricing:
Adjusting prices for international markets
requires consideration of many factors.
(For e.g.: Food Industry )
 7

Enough for
today. . .