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Various pricing strategies adopted by companies to improve sales

By Annphilip Subscribe to RSS | March 8th 2012 | Views:
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Along with product, place and promotion, pricing in an important factor to consider while we develop marketing strategies. Those companies that find right price point at right place and right time will achieve success in the sales of their products.

Pricing strategy depends on both the external factors and the internal factors of an organization. Some of the factors that impact pricing are demand curve of the product, cost involved and pricing decisions of competitors. Companies adopt a variety of pricing strategies based on its marketing goals and objectives. Some of the pricing strategies include -

Premium pricing – In this type of pricing strategy the price of a product will be higher than the competitors. The companies that introduce new products in the market will follow this strategy. This method of pricing can be effective when the product has got any unique feature, or if it is the first of that kind introduced in the market. Some companies use this method if the product has got any additional features than its competitor’s product. Premium pricing helps companies to maximize the profit in the introductory stage of the product life cycle. When the introductory phase is over, certain companies lower the price to retain the demand of the product.

Penetration pricing – As per this strategy, companies introduce products with a low price relative to the competitor’s price. Companies adopt penetration pricing strategy to maximize their market share. This type of pricing strategy will try to utilize the customers general mind set. The middle class consumers always go for products that have lower price. Some customers will think about buying a new product because it is cheap. Even though penetration pricing can cause a loss to the company in the initial stage, the hope is that it will generate more sales in the future. As people who buy the product will definitely explain its pro and cons to their neighbors or relatives, this helps in a word-of-mouth advertisement.

Economy pricing- This type of pricing strategy is followed by companies like Wal-mart. To attract more customers they price certain products in a reasonably low range. Most of the companies adopt this type of pricing strategy just to improve the sales of the products. The renowned food store, Adli is an example of economy pricing strategy.

Price skimming – Companies that had already established goodwill can adopt this pricing strategy. Generally people will think that costly products will be good in quality. Most companies price their products above the general profit level to maximize the revenue before other competitors begin offering similar products or product alternatives. Price skimming strategy can be initiated in the initial stage of the product life cycle. When similar products from other competitors enter into markets, the demand of the product can be increased by reducing the price. Thus price skimming strategy can give advantage to a business in two ways.

Psychological Pricing – There are certain price points where people are willing to buy a product. If the price of a product is $100 and the company prices it as $99, then it is called psychological pricing. In most of the consumers mind $99 is psychologically ‘less’ than $100. A minor distinction in pricing can make a big difference is sales. The company that succeeds in finding psychological price points can improve sales and maximize revenue.

Though advertising and promotional activities can effectively spread information about the product, it’s the price of the product and the quality of the service that determines the sales. If the customer is satisfied with the price and quality, then he will become a regular customer and sometimes make others to buy the product. Online shopping on home computer with connection from providers like Time Warner Internet can offer you products at competitive prices.

Annphilip - About Author:
As a freelancer, Ann is interested in scribbling on various factors that contribute to improved sales. She enjoys online shopping. Ann browses her home computer connected to Time Warner Internet to buy home accesories at competitive prices.

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