The primary aim of any business is to earn profits by enhancing the productivity and selling the products and services. The primary concerns the marketing managers have is to get the products off the shelf. For this, they induce many marketing strategies to promote and sell the goods or services. Pricing is an essential strategy for the marketing strategies for creating a niche for the company. The pricing is a method of deciding upon a competitive price of a particular product or service.
Pricing is a major component of the marketing mix, and the marketing managers have to identify the most suitable prices for the products by considering all other factors such as the competition, economic trends, demand of the product in the market, and the characteristic feature of the product. This is the only component of the marketing mix which concentrates on the revenue generation for a firm. This revenue ultimately helps in generating the profits, and therefore it is one of the most critical aspects of the marketing mix.
To make a successful pricing strategy, the managers have to understand the market conditions and the demand for the product. They also have to know whether the prospective customers would like to spend that much money, or how much people want to pay for such product or service. Pricing strategy gives a company a competitive advantage and an upper hand in the industry. To retain the customers and to provide them with the maximum value for their money the companies have to design correct pricing for its goods and services.
DIFFERENT TYPES OF PRICING STRATEGIES
- Penetration Pricing
When a company needs to enter a market and gain a substantial market share, then they adopt the penetration pricing strategy. This strategy is usually chosen for a couple of months until the company mark its presence in the market. This is seen as an excellent strategy for creating a customer base by creating awareness about the product or the company itself. Many companies keep the prices low when they enter a new market, and this is done to give introductory offers to the customers, and it usually helps them to set up a good customer base in the beginning.
- Economy Pricing
The cost of a few products are kept low, and for that, the cost of promotion and marketing are kept minimal. When the company does not want to spend very much on promoting their product, then the economy pricing comes in to picture. This is also known as a budget pricing as the primary concern of the managers is to manage the budget.
- Psychological Pricing
Many companies create a demand for their product or service by targeting the emotions of people. The prices such as 99 or 999 instead of 100 or 1000 are a perfect example of phycological pricing. The price is the deciding factor whether the customer would buy the product or not. The amount is used as a significant purchase factor by many customers if they have no or little idea about the market.
- Pricing Strategy based on Product Line
If the organization sets the prices of a single product or service and then sets the costs of a different range of products, then it is called the product line strategy. If we talk about the manufacturing firms then making bigger packs and marketing them dies not brings them the desired profit because it gets expensive in itself. But it is a good idea to attract the customers, and this strategy also keeps the interest of the customer in the product. But the smaller packs with less quantity fetch more profitability to the firms
- Pricing of optional products or services
This is a widely used approach, and many companies make use of it. In this, the companies decrease the prices of their one product or service, but the prices of other commodities are kept same. This can be understood b=very easily with the example of the prices of budget Airlines. If the costs of the ticket are kept low, then it is likely that they will charge extra money for all the mandatory things associated with it. For example additional charges for taking a window seat, or taking two or more seats together etc. This is possible that the customers end up paying more money than they have thought of in the beginning by seeing the prices of the air ticket.
- Pricing based on the Captive Products
The captive products can be defined as those products without which the primary product is of no use. For example, an inkjet printer cannot work without its cartridge; the air pollution mask is of no use without its expensive micro fan. The consumers have no option if they need to use specific products, they have to buy the complementary products also. This is an excellent way to increase the sales of the captive product, and it also helps the companies to improve their profit margins.
- Promotional Pricing of the products
This is also one of the most widely used pricing stagey. Here the companies their products or services by offering discounts, money coupons, vouchers, offers like buy one get one free and gits on the purchase of products of a certain amount. This is done to promote the existing or new products and increase the product sales. Some companies also give out free samples of the products primarily in the FMCG industry with their another fast moving item. This is considered as one of the most pricing strategies by the marketing professionals. The primary reason for its success is that the customers many times buy the product due to the discount or the offer. The end of season sales is an example of such type of pricing.
- Pricing based on the Geographic Locations
Many companies decide to vary their prices by the change in the geographic location. This strategy works well if the product has to be sold in a market where there is its high demand or its scarcity. If a particular place does not have enough raw material to produce a product and the product has to be manufactured there then also the prices have to be increased. It has a simple reason, and that is the cost of shipment of the raw material in the certain area or transfer of the product from a place where the raw material is readily available is a considerable expense. Along with that if the product has to be sent across the borders to another country then there will added taxes, customs duties and the difference in the value of the currency will automatically increase the expenses and in turn the prices of the goods.
- Value Pricing
The companies consider adopting the value pricing when they think that the external factors such as the environmental conditions for the competition can affect the value of their product. This is usually done when there emerges a competition in the market with the same or similar product or service then the companies have to think about decreasing their prices.