Pricing Strategies
Destroyer/Predatory Pricing
Deliberate price cutting or offer of 'free gifts/products' to force rivals (normally smaller and weaker) out of business or prevent new entrants. Anti-competitive and illegal if it can be proved
Multiple Unit Pricing
Discounts are given for the purchase of multiple items verses just 1
Premium decoy pricing
Price of one product is set high to boost sales of a lower-priced product.
Geographical Pricing
Price adjustments required because of different shipping agreements.
Creaming or skimming
Selling a product at a high price, sacrificing volume of sales in favor of high profit, therefore 'skimming' the market. Commonly used in electronic markets when a new product is introduced.
Price discrimination
Setting a different price for the same product in different segments to the market. For example, cinema tickets have different prices depending on time of screening.
Market-oriented pricing
Setting a price based upon analysis and research compiled from the targeted market.
Competition-based pricing
Setting the price based on prices of similar competitor products.
Penetration pricing
Setting the price low in order to attract customers and gain market share. The price will be raised later once this market share is gained.
Price Lining
A pricing technique that sets a limited number of prices for specific groups or lines of merchandise.
Loss leader
A product sold at a low price (at cost or below cost) to stimulate other profitable sales. (Eg. cell phones sold cheaply but tied to phone plans)
Cost-plus pricing
A profit is added to the cost of producing the product; this is the price at which the product is available in the market.
Segmented Pricing Strategy
A strategy that uses two or more different prices for a product, though there is no difference in the item's cost.
Product Mix Strategies
Adjusting prices to maximize the profitability for a group of products rather than for just one item.
Tender Pricing
Invites bids for a project, or to accept a formal offer such as a takeover bid. Governments and financial institutions invite bids for large projects that must be submitted within a finite deadline.
Every Day Low Pricing
Low prices set on a consistent basis with no intention of raising them or offering discounts in the future.
Premium pricing/Prestige Pricing
Premium pricing is the practice of keeping the price of a product or service artificially high in order to encourage favorable perceptions among buyers, based solely on the price.
Dynamic pricing
Prices are adjusted according to a customer's willingness to pay. The airline industry often uses dynamic pricing. (similar to price discrimination)
Value-based pricing
Pricing a product based on the perceived value and not on any other factor.
Bundle Pricing
Pricing method in which a company offers several complementary, or corresponding, products in a package that is sold at a single price.
Psychological pricing
Pricing techniques that create an illusion for customers.
High-low pricing
Product is priced higher than competitors, but lower prices are offered on key items or through sales offers.
