Pricing methods or pricing strategies
There are different pricing methods or strategies which are used by the marketer to attract the customer.
1.) Cost based pricing: this type of pricing strategies uses break even concept which means the point where the total cost = total revenue. Profit will be zero at break even point. At level where the total revenue > total cost there is profit and where total revenue< total cost there is loss.
2.) Demand based pricing: it is of two types;
a) Skimming pricing: it means skim the market initially with high price and high profit, later settle down for the lower price. It means skim the cream initially from the market.
b) Penetration pricing: it seeks to achieve high sale with low price. It is generally used when there are non luxury goods.
3.) Competition oriented pricing: in a competitive market the companies generally opt for this pricing strategy. It has three types.
a) Premium pricing: it means price above the competitor’s price.
b) Discount pricing: it means price below the competitor’s price.
c) Parity pricing: it means price equals to the competitor’s price.
4.) Value pricing: this method is used when the objective is not to recover the cost of the product but to judge the value of the product in the eyes of the customer. Like homeshop 18.
5.) Product line pricing: in this case the company need not fix the price for each product rather they fix the price for the entire product line which results in optimal sales through optimal profit.
6.) Sealed bid or tender pricing: this is suitable for those companies where institutional customers call the tenders from the companies. The best and lowest price tender is accepted.
7.) Affordable or social welfare pricing: the pricing is done in such a way that all the segments of the market afford to buy and consume the product as per their need. Like government subsidy help each segment of the consumer to buy the product at an affordable pricing.
8.) Differentiated pricing: in this case different price is charged by the company from the different segment. Like charging low price from the whole sellers and high price from the retailers.
9.) Psychological pricing: many sellers use this technique of selling the product. Like 99 store.
10.) Target pricing: here the price is fixed at full cost + mark up.
11.) Loss leader: sometime firm sell multiple products, charge relatively low price on some popular product with the hope that customer who will buy this product will also buy the other product of the firm.
12.) Cyclical pricing: in depression firm reduce the price of the product while in boom increases the price.
13.) Suggested pricing: in this case the manufacturer or whole seller suggests the retailer to charge this price from the customers.
All the above discussed are the general pricing strategies used by the marketer.