In our earlier post we talked about the importance of having a very good product strategy and the importance of thinking about a number of product decisions. But it is not just about having a good product, that product needs to be priced correctly, correctly means, is the pricing strategies suitable for the target market it is aimed at?
Now lets talk about pricing and the different types of pricing strategies in more detail. Before deciding on a price a firm must firstly:
1. Calculate the cost of making the product.
2. They must also decide on how much customers are willing to pay.
3. Look at competitors pricing and finally
4. The firms overall objectives, that is what does the firm wish to achieve, market share, brand loyalty, awareness?
All of these factors need to be considered before deciding on a price. There are a number of pricing strategies a firm may select that may help them with their objectives.
Pricing Strategies
Penetration Pricing
Simply, a firm enters the market with a low price, the aim is to gain market share over the long term
Skimming Pricing
A firm starts of with setting a high price and then over a period of the products lift span lowers the price in stages.
Phycological pricing
This pricing strategy is all about trying to make the customer believe that there is a physcological gap between one price point and another. An example will be where the firm charges £99 or a product rather then £100, or $149 instead of $150. Although only a pound or dollar difference the consumer will 'feel' phycologically that the price is greater. This pricing strategy also allows the firm to claim in their advertisment that the product is below £100 pounds or below $150 dollars.
Product Line Pricing
If a firm sells a range of different products they will charge different prices for these products based on their features. For example. Nokia sell a variety of different mobile phones. They will charge different prices based on the features and benefit of each model.
Cost Plus Pricing
A fairly simple and straight forward pricing strategy where the firm decides on a percentage mark up as profit. For example if it costs £200 to produce a games console, the firm may decide on a 50% profit margin and will then charge £300, the £100 being their profit.
Premuim Pricing
The firm delibrately sets a high price to reflect the exlusiveness of the product. This pricing strategy has to be supported by a very good product strategy. If customers feel that they are not getting value for the premium price, then it may have an impact on the firms overall image.
For more information please look at www.learnmarketing.net/marketingmix.htm
Next Promotion
Now lets talk about pricing and the different types of pricing strategies in more detail. Before deciding on a price a firm must firstly:
1. Calculate the cost of making the product.
2. They must also decide on how much customers are willing to pay.
3. Look at competitors pricing and finally
4. The firms overall objectives, that is what does the firm wish to achieve, market share, brand loyalty, awareness?
All of these factors need to be considered before deciding on a price. There are a number of pricing strategies a firm may select that may help them with their objectives.
Pricing Strategies
Penetration Pricing
Simply, a firm enters the market with a low price, the aim is to gain market share over the long term
Skimming Pricing
A firm starts of with setting a high price and then over a period of the products lift span lowers the price in stages.
Phycological pricing
This pricing strategy is all about trying to make the customer believe that there is a physcological gap between one price point and another. An example will be where the firm charges £99 or a product rather then £100, or $149 instead of $150. Although only a pound or dollar difference the consumer will 'feel' phycologically that the price is greater. This pricing strategy also allows the firm to claim in their advertisment that the product is below £100 pounds or below $150 dollars.
Product Line Pricing
If a firm sells a range of different products they will charge different prices for these products based on their features. For example. Nokia sell a variety of different mobile phones. They will charge different prices based on the features and benefit of each model.
Cost Plus Pricing
A fairly simple and straight forward pricing strategy where the firm decides on a percentage mark up as profit. For example if it costs £200 to produce a games console, the firm may decide on a 50% profit margin and will then charge £300, the £100 being their profit.
Premuim Pricing
The firm delibrately sets a high price to reflect the exlusiveness of the product. This pricing strategy has to be supported by a very good product strategy. If customers feel that they are not getting value for the premium price, then it may have an impact on the firms overall image.
For more information please look at www.learnmarketing.net/marketingmix.htm
Next Promotion
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