Jun 1, 20212 min read

Types Of Pricing Strategies

Pricing Strategy

Price is the total amount that a consumer pays for a product or service.

Companies tend to determine the optimum price for their product or service based on the market share, positioning & competition and the perceived value of the product.

The same products can employee different pricing strategies over the period of time.

Different forms of pricing strategy are as follows:

Premium Pricing

• Product/Service is unique.

• Perceived Benefit of the product is high.

• High competitive advantage must exist with the marketer.

• E.g. Ferrari, iPhone, Gucci

Penetration Pricing

• Setting the price low with the goal of attracting customers and gaining market share.

• Price is raised once market share is gained.

• Typical in Indian Aviation Industry.

Predatory Pricing

• Selling at extremely cheap rate to quickly increase the market share.

• Works for service based industries like Telecom, Insurance, Banking, IT etc.

• Law may curtail & punish if found it anti-competitive.

Geographical Pricing

• The price variation in different parts of the world can be a business strategy or forced upon by the local market.

• It usually occurs due to difference in PPP, taxes, duties etc.

• Example is Gasoline & Alcohol.

Price Skimming

• Charge a high price initially because product is unique and you have a competitive advantage.

• Advantage is not sustainable and eventually price is reduced due to enhanced competition.

• Flagship Smartphones & other electronics.

Psychological Pricing

• Marketer wants to entice customer into thinking that product is cheaper.

• Product is available at Rs 199/- instead of Rs 200.

Dynamic Pricing

• Dynamic pricing, also referred to as surge pricing, demand pricing, or time-based pricing is a pricing strategy in which businesses set flexible prices for products or services based on current market demands.

• It is a common strategy adopted by the transportation, tourism and hospitality industries.

Captive Product Pricing

•If products have complements, the core products are generally offered at a lower price while the captive products which are necessary to use the core product are priced highly. •E.g. Razors and Blades, Printers and Cartridges.