PRICING : "An Important Strategy" Inspired by Prof.Javed.

Gone are those days of barter system, as the need arised for calculating the the actual value of product in quantitative terms rather than qualitative terms.Something was always missing to justify the value of the product and than "Price" came into picture.Price is real worth of the product or value for money.

Let me take you all to a real ride : Put the customers specs and have a glance.......

I went to a ezone in treasure island in indore...I thought of purchasing a plasma T.V. of sony but as I realised by having a glance at price tag I was shocked it was 164000 indian rupess.

But the sensatious experience forced to buy atleast something,as it was a diwali time various promotional offers were going on then I thought of purchasing a micro-wave-owen but as soon as I saw the price tag it was of LG worth rupees 9000 with some special offer, coupons were offered on its purchase.

Soon I realised to go for the hand mixer for my mom and I approached the shelves where it was kept and suddenly I felt this is actually what I can purchase, price was just rupees 2999 only.

At this particular moment my internal stimuli forced me to buy mixer as stimuli responded I purchased it and felt very happy that purchasing from treasure island is cheaper than purchasing from local electronic store as the mixer's price at local stores was whooping, ........................rupess 3000, and I got it for just rupees 2999 only.

So the pricing strategies plays a very vital role in moving the products from the shelves.Before pricing the product company should consider various factors :Govt. regulations,target consumer,competitors and many more.

There are many ways to price a product. Let's have a look at some of them and try to understand the best strategy in various situations.

Premium Pricing.
Use a high price where there is a uniqueness about the product or service. This approach is used where a a substantial competitive advantage exists. Such high prices are charge for luxuries such as Sony, Savoy Hotel rooms, and Concorde flights.

Penetration Pricing.
The price charged for products and services is set artificially low in order to gain market share. Once this is achieved, the price is increased. This approach was used by France Telecom and Sky TV.

Economy Pricing.
This is a no frills low price. The cost of marketing and manufacture are kept at a minimum. Supermarkets often have economy brands for soups, spaghetti, etc.

Price Skimming.
Charge a high price because you have a substantial competitive advantage. However, the advantage is not sustainable. The high price tends to attract new competitors into the market, and the price inevitably falls due to increased supply. Manufacturers of digital watches used a skimming approach in the 1970s. Once other manufacturers were tempted into the market and the watches were produced at a lower unit cost, other marketing strategies and pricing approaches are implemented.

Premium pricing, penetration pricing, economy pricing, and price skimming are the four main pricing strategies. They form the bases for the setting the price. However there are other important approaches to pricing.

Psychological Pricing.
This approach is used when the marketer wants the consumer to respond on an emotional, rather than rational basis. For example 'price point perspective' 99 rupees not 100 rupees.

Product Line Pricing.
Where there is a range of product or services the pricing reflect the benefits of parts of the range. For example car washes. Basic wash could be rupees 100, wash and wax rupess 400, and the whole package rupees 500.

Optional Product Pricing.
Companies will attempt to increase the amount customer spend once they start to buy. Optional 'extras' increase the overall price of the product or service. For example airlines will charge for optional extras such as guaranteeing a window seat or reserving a row of seats next to each other.

Captive Product Pricing
Where products have complements, companies will charge a premium price where the consumer is captured. For example a razor manufacturer will charge a low price and recoup its margin (and more) from the sale of the only design of blades which fit the razor.

Product Bundle Pricing.
Here sellers combine several products in the same package. This also serves to move old stock. Videos and CDs are often sold using the bundle approach.

Promotional Pricing.
Pricing to promote a product is a very common application. There are many examples of promotional pricing including approaches such as BOGOF (Buy One Get One Free).

Geographical Pricing.
Geographical pricing is evident where there are variations in price in different parts of the world. For example rarity value, or where shipping costs increase price.

Value Pricing.
This approach is used where external factors such as recession or increased competition force companies to provide 'value' products and services to retain sales e.g. value meals at McDonalds.