Different Types of Marketing Pricing Strategies
Pricing strategy in the market is the process of identifying the optimum price for a certain product that is yet to be introduced or already exists.
Pricing, product, place and promotion makes up the four elements of marketing mix. Without pricing, the marketing strategy becomes incomplete. For entrepreneurs who wish to achieve success, pricing strategy is very important.
The strategy helps in identifying the price point where sales and profits can be maximized. There are different types of strategies that can be used depending on the company’s own marketing goals and objectives.
Premium Pricing Strategy
Premium pricing strategy establishes a higher price compared to that of competitors. The strategy best suits situations whereby a new product is introduced and the company has a competitive advantage or the already existing product is unique from the rest of the products in the same industry. Premium pricing strategy helps companies entering the market to anticipate maximizing revenues during the early stages of product life cycle.
Penetration Pricing Strategy
Penetration pricing strategy is designed to capture the market share by entering the market with a lower price than that of competitors to attract customers. Penetration pricing is based on the idea that business attracts people to test the product and increase brand awareness. Penetration pricing strategy can hypothetically create loss for the company. However the strategy creates awareness amid a crowded market category, increases popularity and captures as many customers as possible.
Economy Pricing Strategy
In economy pricing companies take a very basic and low-cost approach to marketing. The organization works towards keeping the prices low and attract the specific market that responds sensitively to prices. The price sensitive market is the market that has no interest on the attractiveness of advertisements or packages, but basically concerned with the eventual price of the commodity. An organizations such as Wal-Mart and Aldi don’t use any fancy approach in marketing and are therefore able to maintain low marketing cost hence can afford to lower their products’ price to meet the targeted market.
Price Skimming Strategy
Price skimming is best for companies in the market with a significant competitive advantage. These companies could be enjoying monopoly or their products are unique and mostly preferred by the market. They utilize price skimming strategy to gain maximum revenue before other competitors can start offering similar products or produce alternatives to the product. in price skimming, these companies project that in the event a competitive product gets introduced to the market, they would have maximized their revenue and therefore may strategically lower price to continue competing effectively.
Psychological Pricing Strategy
Psychological pricing is meant to play with the minds of customers into thinking that the product is cheaper than other similar products. Psychological pricing is commonly used by marketers in the prices they establish for their products. The product price is strategically lowered by a small figure compared to the prices of competing product. More customers will be lured into purchasing the product because it appears cheaper. Eventually, the product sells more and becomes more popular. For instance, $ 199 is psychologically less than $ 200. With these minor distinctions the company normally makes a huge difference in returns.
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