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?
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.
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 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 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.
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.
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/-.
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.
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.