Pricing is a complex structure used by companies to sell their products. When products move through the life cycle the prices change to fit that need. Companies also adjust prices based on environmental factors, cost, and demand (Kotler and Armstrong, 2014). Below we will examine different pricing strategies as well as public policy associated with pricing.
Pricing Strategies
There are different types of product strategies made to fit the life cycle stage of the product.
New- Product Pricing Strategies
This section of pricing strategies is aimed to fit the product at the introductory phase of it’s product life. The first is Market-Skimming Pricing, this strategy sets a high price for the product so revenue can be maximized layer by layer from segments willing to pay a higher price. Next there is Market-Penetration pricing, this strategy sets a low price so it can appeal to a large number of buyers and gain market share.
Product Mix Pricing Strategies
This section of pricing applies to products that are in the product mix. The first option is Product Line Pricing, this option sets prices across the whole product line by determining the cost of each product along with evaluations. Optional Product Pricing prices optional accessory packages or products that enhance the main product purchase. Captive Product Pricing happens when products sold separately but are necessary for the main product are priced. By-Product pricing happens when prices are set low to get rid of them in order to make a profit. Last Product Bundle Pricing offers products in a bundle at a reduced price.
Price Adjustment Strategies
companies use different techniques to adjust prices fir for the consumers. They take in considerations of geographical location factors as well as segments. Sometimes the same products price will be shifted based on the income of the area. In addition companies use promotional pricing where large discounts are offered to appeal to the buyer, this is somewhat like psychological pricing because they use pricing to appeal to the buyer. For example, since pricing is sensitive to buyers they want to see and believe they are receiving the best deal. Prices are always being adjusted to meet the needs of consumers in the market.
Public Policy
Public policy helps ensure companies cannot set a price at whatever they want it to be, even though it is a free market. There are laws enforced by state, federal, and city government that ensure a “fair play” in pricing takes place (Kotler and Armstrong, 2014). There are price-fixing regulations which make sure companies don’t talk to competition before setting their prices. In addition sellers cannot use predatory pricing which is selling at a low cost to harm competitors. In addition deceptive pricing has to be monitored to ensure that savings are not mislead to the consumer.
Applied Work
Examples of pricing strategies can be found in the (applied work) tab under practicum presentation. The Microsoft surface sales take in consideration of segmented markets of college students and busy professionals to set prices. There are some examples associated with the use of pricing in the Market plan section as well.
Sources
Kotler, P. & Armstrong, G. (2014). Principles of Marketing. Upper Saddle River, NJ: Pearson Education, Inc.
Journey through Marketing 