Pricing Strategies

Strategies on Pricing

Introduction

Earning more profit and acquiring more market share is the basic motto of any organization. The profit can be earned by selling our products in the market. Obtaining market share can be done by showing more qualitative products at less prices than the other companies. Pricing seems to be small but plays a crucial role in the growth of the organization. So, let's see how the prices are made and what are the Pricing Strategies available? 

 

Definition

Pricing Strategy is a tool used to fix the price of a particular product or service by considering various factors like the consumption of resources, Market conditions, the ability of customers, demand and supply, need of the product like regular item or occasional, etc.

 

Types of Pricing Strategies

We have had different Pricing Strategies available in practice form for a long time. Organizations can opt for a suitable strategy that meets their requirements and expectations. Let us see all the product Pricing Strategies one by one to get a clear idea. 

 

Premium Pricing:

In the premium Pricing Strategy, the prices of goods and services are a bit higher than the general prices. These are especially concentrated on premium segment people. Some people may have a perception that if the price of the product is high, then only the quality maintains up to the mark. If anyone announces a discounted sale or half price, they even suspect the reliability and quality of that product. Especially for those people, the premium Pricing Strategy was used at the same time they needed to maintain the quality, which means that price.

 

Penetration Pricing:

Penetration Pricing Strategy is one of the three major Pricing Strategies. Generally, it is used by the new traders to gain a foothold in the market. The sellers wanted to attract more customers by decreasing the price of the product. So that the customers can show interest in purchasing them and they can know the users and the quality of that particular product. Once the customers get used to that product, the price may increase.

 

Economy Pricing:

Economy pricing is one of the best Pricing Strategies, which considers the generalized category of customers. These are majorly affordable and reasonable prices as much as they can provide. The economy class can be easily understood if we consider the scenario of flight tickets. The least amount required for the entire journey will be fixed as the price for the economy category.

 

Price Skimming:

It is an occasional Pricing Strategy where the well-known product has reduced its sales drastically. Even though its market share is very good for some time, with any kind of factor, they may be reduced, yeah abnormally. Then to regain the market share and to get back its customers, the price will be reduced.

 

Psychological Pricing:

Among the three major Pricing Strategies, psychological pricing is also there. This Pricing Strategy can be seen everywhere. For example, Bata introduces a new kind of shoes, and the price is rupees 1,999 /-. The psychology of the human brain is ready to accept 1999 rupees, and it is not ready to take 2,000 figure 2. That's the reason several companies use this psychological Pricing Strategy. Usually, electronic appliances were tagged with this Pricing Strategy. Bata, Samsung, Amazon, etc., can be considered as examples of Pricing Strategies.

 

Product Line Pricing:

It is one of the differential Pricing Strategies. Here the prices may vary based on the size of the product. Even though the product is the same if we purchase a single product, the price may be 10 rupees. If we purchase 5 pieces, the price may be rupees 45. Similarly, 100gm oil is 20/- 500ml is 80/-. 

 

Pricing Variations:

Another differential Pricing Strategy is variations in the pricing structure. It is usually observed in travel agencies. For example, if we book an air ticket 2 months before, the price will be less. If we book the ticket as we thought it would be before, the price may increase slightly. If we want to buy Tatkal tickets, the price may increase more.

These are the various types of product Pricing Strategies. It is to be noted that apart from these types, we have different kinds of classifications based on the requirement, scenario, product, etc. So, the company needs to choose according to its product, Market share, competitors, etc.

 

Conclusion

The topic Pricing Strategy is one of the important topics of the syllabus and students can get a good understanding of the topic with the information provided above. Also, students should know the pattern to complete the answers in the right format to score extra marks in their exams. Practice will help students to get good confidence before appearing in the examination. They can go through the practice papers and important questions prepared by Vedantu’s expert teachers who have deep knowledge about the subject and they have years of experience in providing the best study material to help students to prepare for the examination.

FAQs on Pricing Strategies

1. What is the Significance of Pricing Strategy?

Formulating and implementing a price rate Pricing Strategy is very beneficial for the customers, traders, organization. Some of the benefits are- 

  • It helps to fix a proper price for a particular product.

  • It makes us enter the market easily.

  • It increases the name and fame of the organization.

  • It is the best means of comparison from our competitors.

  • Need help to determine the profit by deducting the cost of the product from the price.

  • It helps in promoting sales, promoting products, and increasing market share.

The buyers see pricing as one of the very important factors in deciding between different products and services, therefore knowing the best price to charge to maximize sales and profits is critical to outperforming the competition.


Vedantu is the platform where you can get a complete understanding of the significance of Pricing Strategies. The experts will guide you to get complete knowledge about the significance of pricing policies. The expert teachers will guide you to know the tips to prepare this chapter well and score good marks in the examination.

2. Does the Pricing Strategy Process Any Drawbacks?

Of course, it is. Along with several benefits of Pricing Strategy, it also has certain limitations. They are

  • It has several risk chances to reduce the market share by the influence of competitors.

  • For premium price products, the product can't be reached to all the people because most of the population is under the economy category.

  • For small-scale industries, the selection of Pricing Strategy requires a team, and it becomes another burden to the firm.

The Pricing Strategies have more benefits than limitations, as when you study Pricing Strategies you will get to know complete details about them. The best way to know what is best for your business is by getting a good understanding of the pricing policies. The main criteria of pricing the products should be selected with a good knowledge of the profits and the inbuilt cost of the product. This will help you to grow your business and get a stable way in the long run. Also, you should not ignore the drawback. It is always recommended by the experts to know the limitations to get prepared for certain situations which you can face when it comes to the growth and stability of the business.

3. What are the Four C's Required for Pricing Strategy?

well formulating the Pricing Strategy, the major four pillars which make the strategy more effective are -

  • Customers: The first and the foremost thing which we need to consider while formulating a Pricing Strategy is about customers because these are the resources for the company to sell its product.

  • Cost: Another pillar of Pricing Strategy is cost. Based on the cost of the product, only we need to add some margin, and then we can fix the price. Finally, the product can be introduced into the Mamarketith with its price tag.

  • Current Positioning: The present condition of the market is also another factor for pricing. If the product is innovative and we are the first to introduce this product into the market, we can set a level of price for that. If the product is top-rated and available from multiple competitors, then we need to fix a price accordingly.

  • Competitors: The price which we need to fix a price for the product should exhibit its uniqueness from all the competitors. Then only it can reach the customers easily and perfectly.

4. What is the importance of topic Pricing Strategies?

Pricing defines the value of the product, that is it's worth it for you to make and for the customer to use that is why it is a very important topic. The tangible price is the point at which the customer gets the knowledge about whether the product is worth their time and money or not. Your overall profitability for the future will be shaped by Pricing Strategies.


These are the reasons why pricing policy is so important. You can get complete knowledge about this on the #1 online learning portal Vedantu which is the best portal that provides you with complete guidance for all your educational queries. The best platform to clear all your doubts and get a better understanding of all the topics, the personalized classes help you to get the best result under expert guidance. The top-notch teachers of Vedantu provide you with the best study material for Pricing Strategies and help you to understand all the types of Pricing Strategies and score good marks in commerce.

5. Where can I find the best study material for Commerce Pricing Strategies?

Pricing Strategies is a complex topic and students need good guidance to completely understand this topic well for exams. Under the commerce subject, all the topics should be explained with examples to give better understandability. The study material of Vedantu is prepared in such a manner that it is well organized and students don’t need to waste their time to the searcher for different study material they can go to Vedantu’s commerce section and click on the topic to get complete study material that includes the important question of that topic and the solutions for that topic. The main aim of expert teachers is to guide students to get a good understanding of the topics and make the best out of them.


Vedantu is a one-stop solution where students get the best online tuition classes from the subject experts to get the students prepared for their final examination. There are many other platforms but Vedantu is the most reliable platform that is certified to provide you with 100% accurate study material. Students should select Vedantu to clear their concepts well as the study material is in very simple language and the concepts are explained in the detail with examples to help the candidate get a clear understanding.

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