PRICING STRATEGIES

Module # 2 – An Overview – PART 2

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INTENDED LEARNING
OUTCOME
In this lesson, students will be.

• Identify and critique the best practices of successful

companies in the field of manufacturing and
merchandising when it comes to price adjustment
strategies and price changes
PRODUCT MIX PRICING
STRATEGIES
• The product mix is the collection of all those
products and services that a particular company
offers in the market.

• The set of all product line or item which a

particular seller offers to sale.

• The number of all product of similar nature or

kind offered by a particular seller for sale.
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PRODUCT LINE PRICING
This strategy is used for setting the price for
entire product line. Many companies now a
day develop product line instead of a single
product. So product line pricing is setting
the price on the base of cost difference
between different products in a product
line. Marketer also keeps in mind the
customer evolution of different features and
also competitive prices.
OPTIONAL 04

PRODUCT PRICING
This strategy is used to set the price of optional
products or accessories along with a main product.
For example refrigerator comes with optional ice maker or
CD players and sound systems are optional product with a
car.

Organizations separate these products from main product

because organizations want that customer should not
perceive products are costly. Once the potential customer
comes to the show room, organization employees explain
the benefits of buying these optional or accessory products.
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CAPTIVE PRODUCT
PRICING
This is strategy used for setting a
price for a product that must be used
along with a main product, for
examples blades with razor and films
with a camera. Gillette sells low
priced razors but company make
money on the replacement of
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BY-PRODUCT PRICING
By-product pricing is determining of
the price for by-products in order to
make the main product’s price more
attractive and competitive. For
example processing of rice results in
two by-products i.e. rice husk and
rice brain oil, and sugar cane with
husk. Now if company sells husk and
brain oil to other consumers, they
will generate extra revenue by
PRODUCT BUNDLE PRICING 07

This is a common price and selling strategy

adopted by many companies. Many
companies offer several products together
this is called a bundle. Companies offer the
bundles at the reduced price. This strategy
helps many companies to increase sales,
and to get rid of the unused products. This
bundle pricing strategy also attracts the
price conscious consumer. Best example is
anchor toothpaste with brush at offered
lower prices
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PRICE ADJUSTMENT
STRATEGIES
• Discount and allowance pricing reduces prices to reward customer for certain responses such
as paying early, volume purchases, and off-season buying.
• Discounts
• Cash discount for paying promptly
• Quantity discount for buying in large volume
• Functional (trade) discount for selling, storing, distribution, and record keeping
• Allowances
• Trade-in allowance for turning in an old item when buying a new one
• Promotional allowance to reward dealers for participating in advertising or sales support
programs
 SEGMENTED PRICING 09
is used when a company sells a product at two or more prices even though the difference
is not based on cost.

• Adjust basic prices to allow for differences in customers, products, and locations
• Airlines, hotels and restaurants – revenue management or yield management
To be effective:

Segments must show different

A Market must be segmentable B degrees of demand

Watching the market cannot exceed

C the extra revenue obtained from D Must be legal
the price difference
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PSYCHOLOGICAL Noting current prices

PRICING
occurs when sellers consider the psychology
of prices and not simply the economics. Remembering past prices

Reference prices are prices that buyers carry in

their minds and refer to when looking at a
Assessing the buying
given product.
situations
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PROMOTIONAL PRICING
is when prices are temporarily priced below list price or cost to increase
demand.

• Loss leaders
• Special event pricing
• Cash rebates
• Low interest financing
• Longer warrantees
• Free maintenance
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