Product Pricing Strategies
Periodic discounting
'off-peak' pricing, early booking discounts, etc
Geographical pricing
- different prices for customers in different parts of the world - e.g. includes shipping costs, or place on PLC
economy pricing
- placed at 'no frills', low price
Product line pricing
- rationale of a product range - e.g. MARS 32p, Four-pack 99p, Bite-size £1.29
product-bundle pricing
- sellers combine several products for a price that is cheaper than when purchased individually - Products must be complementary
Psychological pricing
- to get a customer to respond on an emotional, rather than rational basis - .e.g P0.99 not P1.01 - 'price point perspective
value pricing
- usually during difficult economic conditions - e.g. Value menus at McDonalds
Price skimming
- where prices are high - usually during introduction - e.g new albums or films on release - ultimately prices will reduce to the 'parity'
Promotional Pricing
BOGOF (Buy One Get One Free) e.g. toothpaste, soups, etc
Secondary market discounting
Only the second market enjoys lower pricing e.g. Unilab sells branded products but also entered generics market to sell cheaper versions.
Experience curve pricing
Price is driven down over time as production cost go down
premium signalling
Set high price by offering unique features e.g. balcony vs. orchestra, regular vs. suite rooms
Image pricing
Set high price to signal high quality for one product, and a lower price for another which is exactly the same. Cross-subsidy occurs. E.g. bottled water variants, clothes variants
Random discounting
Uses "sales" price or special discounts occasionally to attract consumers and maximize profit
Premium Pricing
Uses a high price, but gives a good product/service exchange
Complementary Pricing - Two-part pricing
fixed fee plus variable fee e.g. clubs with entrance fee and monthly dues
Penetration pricing
offers low price to gain market share - then increases price
Complementary Pricing - Captive Pricing
products that complement others e.g. Gillette razors (low price) and blades (high price)
Complementary Pricing - Loss-leader pricing
supermarket drop the prices to attract consumers in the hope that the volume will make up for the price loss.