[17][citation needed], Firms need to ensure they are aware of several factors of their business before proceeding with the strategy of price discrimination. The two products with the similar prices should be the most expensive ones, and one of the two should be less attractive than the other. Value-based pricing have many effects on the business and consumer of the product. [15] This strategy is dangerous as it could be destructive to a firm in terms of losses and even lead to complete business failure. Pricing Strategy Pricing is one of the classic “4 Ps” of marketing (product, price, place, promotion). It is an unethical act which contradicts anti–trust law, attempting to establish within the market a monopoly by the imposing company. While most uses of pay what you want have been at the margins of the economy, or for special promotions, there are emerging efforts to expand its utility to broader and more regular use. Just like economic factor, I feel this point is self explanatory. The rich, the middle class and the poor or more preferably “low income earners,” who are always the majority in terms of population. This will require you to consider carefully what your market can afford to pay for your product or services, thereby enabling you to zero in on your target market share objectives; while obtaining revenue at the same time. The context is a state of limited competition, in which a market is shared by a small number of producers or sellers. This strategy is often used to target "early adopters" of a product or service. [8] Supermarkets and restaurants are an excellent example of retail firms that apply the strategy of loss leader. This strategy can sometimes discourage new competitors from entering a market position if they incorrectly observe the penetration price as a long range price.[12]. So before fixing a price for your product, make sure you strike a balance between the price of your product and its perceived value. This idea can only be realistic when you have a monopolistic hold on the market. However, variable pricing strategy excludes the cost of fixed pricing. Customer Value Price Cost Product Product Cost Price Value Customer Cost-based pricing Customer value-based pricing Your adopted product pricing strategy can give your business an unfair advantage just like Wal-Mart’s and that’s why most businesses try to compete at the price level. This is done by calculating all the costs involved in the production such as raw materials used in its transportation etc., marketing and distribution of the product. Penetration pricing includes setting the price low with the goals of attracting customers and gaining market share. Let's say there are two products, beef and pork. So whatever product pricing strategy you choose; just make sure it positively adds to your bottom line. Value-based pricing is a fundamental business activity and is the process of developing product strategies and pricing them properly to establish the product within the market. Building an effective pricing strategy for your products or services is key to successful sales. The sum total of the following characteristics is then included within the original price of the product during marketing. Price discrimination is the practice of setting a different price for the same product in different segments to the market. 358-360), which can be diverse in an international context.. When a "featured brand" is priced to be sold at a lower cost, retailers tend not to sell large quantities of the loss leader products and also they tend to purchase less quantities from the supplier as well to prevent loss for the firm. But in this case, I am not talking about production cost. If you stand still, they will swallow you.” – Victor Kiam. With respect to normal business and market economics, you should never price your product below its actual cost price. He is the Executive Producer @JanellaTV and also doubles as the CEO, POJAS Properties Ltd. 10 Relationship Marketing Strategies to Boost Customer Loyalty, B2B Vs Business to Consumer Marketing: What’s the Difference, Introduction to Global Marketing Strategies and Branding, Top 5 Ways to Make A Lasting Impression on Your Customers, The Importance of Market Research in Business, 10 Benefits of Using Twitter for Business. In order to employ value-based pricing, one must know its customers' business, one's business costs, and one's perceived alternatives. This strategy will make people compare the options with similar prices; as a result, sales of the more attractive high-priced item will increase. Market-Penetration Pricing – New Product Pricing The opposite new product pricing strategy of price skimming is market-penetration pricing. In some cases, using the pricing strategy to stay competitive can be very disruptive throughout markets; because once you have lowered the price of your products and services to have things going your way, restoring it can be next to impossible.

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