Choosing The Right Pricing Strategy for Your Marketing Plan: The pricing refers to the financial payment that a company asks from its customers in return for offering a specific product or service. It is an essential aspect of the marketing mix strategy of an organization. The price paid by the customers leads to the revenue generation of the company, which is eventually determines its financial position, and long-term sustenance and growth. However, the pricing of the product also communicates the value of the product to the customers. Therefore, choosing the right pricing strategy for your product is extremely important. According to a professional college essay writing service, an organization can choose from various pricing strategies, which is best suited for its value proposition and its brand image. In this article, we have covered a detailed understanding of various pricing strategies, so that it can help you to choose the right one for your marketing management paper.
The cost-plus pricing is perhaps the simplest form of pricing strategy, where the price of a product or service is determines by a fixed mark-up, which is added to the per unit cost. The proprietor of a business decides the amount of profit they to make from the business, which determines the percentage of mark-up added to the cost of each product unit. This type of pricing is suitable for small retail businesses, where the owner a specific idea of the profit that they want to make at the end of each month, based on the cost of running the business.
Value Based Pricing:
The value-based pricing determines the price of the products based on the product value as perceived by the customers. In order to implement this pricing strategy, the marketer first needs to understand the perception of the customers, towards a particular product category or value offering. Therefore, the pricing of the product is determined while choosing all the other aspects of marketing mix, so that the pricing can be matched with the perceived value created by the company. For example, a Mercedes has a much higher perceived value than a Volkswagen, which corresponds of high price difference, between the two brands.
Competitive Pricing or Competition based Pricing:
In a competitive pricing strategy, a company sets the prices of a product based on the prices of the competitor’s products. This strategy relies on the fact that the customers often make their purchase decision based on the best value for money option that they can find on the market. Following the competitive pricing, a marketer can set the price of their product closer to or slightly lower than that of the competitors. The companies try to increase the value for money by setting a lower price on the product. Given an identical features and attributes, a customer is likely to choose the product with lower price.
In case of premium pricing, a company sets the price of a product much higher than the market standards. The high price is justified by the high ownership value of the product. Premium pricing does not necessarily mean that the product has high utility or better attributes or features, as it can also be justified by the hedonistic or emotional value of the product. While writing my paper for me, I came up with the most appropriate example. Rolex sets an extremely high price for its products. Although the core utility of a Rolex watch is identical to that of a Timex watch, which is timekeeping, but a Rolex offers a much higher emotional value and social status for the owner.
Penetration Pricing, also known as introductory pricing, is most suitable for companies which are trying to create a strong foothold on the market and to achieve higher sales volume. Following this strategy, the marketer sets a lower price compared to other brands in the markets, for a brief period of time. This as a result, attracts a lot of customers and helps in creating a strong brand awareness in the market. It should be noted that the lower prices are only offered for a short duration of time, to attract the customers to the new brand.
In the price skimming strategy, the marketers set a high price during the introduction of the product and eventually reduces the price over time. According to an expert paper writing help, this pricing strategy allows, them to cater to multiple segments in the market, and is quite common for products with short refresh cycle, such as smartphone. Smartphone brands, sets a high price for a newly launched product, but in eventually reduces its price, whenever a new iteration in available. This as a result, allows the company to cater to both the niche as well as the mass market, with the same product.
The promotional pricing is typically used during specific time of the year, when the sales are likely to increase. In this strategy, companies offer discounts on their existing product line to attract more customers and drive higher sales. Promotional pricing is typically, found during festivals such as Christmas, New Year, Thanksgiving, etc. It makes it easier for the customers to make an easier decision of purchase by offering them a lower price. However, during festive seasons, almost every company offer discounts, to attract customers, which can sometime turn into a price war.
These are some of the most commonly used pricing strategies, that you can use in your marketing strategy or business plan. Just keep in mind, that the success of a pricing strategy depends on how well it is aligned with the product offering, brand image and the current market conditions.