Welcome!!!

Presented by: Swikriti Bhari Presented to: Bhaktiram

Neupane Sir
 Topic of presentation:
Types of Pricing Strategies
 Pricing Practice/ Strategies

Pricing strategies are the methods and procedures

companies employ to determine the rates they charge
for their goods and services. Pricing is the amount you
charge for your items; pricing strategy is how you
calculate that number.
 Predatory pricing
Predatory pricing refers to the act of setting price of a product
below cost of production with the intention of forcing rival firms
out of the business or to eliminate the competition. In other words,
it is the pricing strategy in which price of a good or service is set
very low with the intention of drive competitors out of the market
or creating barriers to entry of potential new competitors.
Some advantages and disadvantages:
 Advantages:
 Predatory pricing strategy result in lower prices, more choices and competitive market
which are good for consumers.
 Financially weaker competitors will be driven out from the market, and the form that has
employed predatory pricing strategy can enjoy monopoly power with higher profit in the
long run.
 This strategy has the form to achieve a dominant position in market.
 If the firm or company announces to employ predatory pricing again, it will discourage
possible new entrants, drive the new competitors out of the market again.
 This policy is helpful to utilize economies of scale.
 Disadvantages:
 The predator charges considerably higher price in the long term as well as lack of choice,
from which consumers are exploited.
 It may be illegal depending upon the government rule.
 Predatory pricing strategy may not work if the government employed the price control
policy.
 In the long run, new competitors may enter new products and low prices.
 Maximization of profit is not possible by cutting down the price below the cost of
production.
 Skimming pricing

The skim pricing is a product pricing strategy by which a firm

charges the highest initial price for a product or service that
customers will pay. As the demand of the first customers is
satisfied, the firm lowers the price to attract another, more price
sensitive segment or layer of the consumers.
Some advantages and disadvantages:
 Advantages:
 Price skimming strategy helps to make a high-quality image and perception of the
product.
 The company can quickly recover its cost of development by using this strategy.
 This strategy generates a high profit margin for the company.
 This strategy is helpful to utilize economies of scale.
 It helps distributors of the company to earn a higher percentage of markup.
 Disadvantages:
 The product may not be sold in the market if the producer is unable to justify its higher
price.
 If the firm is unable to sell a large amount of product using price skimming, the firm may
not be able to utilize economies of scale.
 Price skimming may not be a long-term strategy because competitors may soon enter into
the market with rival product and pricing pressure.
 The friend having a history of price skimming, may not sell the product at the desired
level and price because the consumer may wait for a time before purchasing the product
with the expectation of a fall in price.
 Penetration pricing

Penetration pricing is a pricing strategy used by new entrance to

enter into the market with new product for which substitutes are
available, usually by setting a very low price.
Some advantages and disadvantages:
 Advantages
 The penetration pricing strategy of a product quickly attracts customers and customers
also accept product.
 It increases the market share of the company by switching customers from competitors.
 It generates high scales quantity from which the firm can realize economies of scale and
lower the marginal cost.
 The customers who can find a good buy in a product are likely to return to the company or
brand shortly. So it increases the goodwill of the company or the brand.
 Penetration pricing strategy increases the turnover rate of the company.
 Disadvantages
 If the firm employing a penetration pricing strategy gradually increases the price of the
product, the customers of its product may stop purchasing the product due to the
unexpectedly high price.
 Penetration pricing typically attracts the customers who look for a place to buy the product
at a price that is cheaper than usual. Such customers are likely to switch competitors if
they find a better deal. So, low customer loyalty is found under this pricing strategy.
 Penetration pricing i.e. Selling the product at a very low price may not be long-term
strategy for a firm because, in most cases, the firms may not be able to cover the costs if
they employ this strategy over a long period.
 It may create a price war among the competitors which may decrease the overall
profitability of the market.
 If most of the customers of the products perceive the brand as cheap, then it can damage
the image of the brand.
Thank you!!!