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.