Pricing

There are many different pricing strategies to help sell a product. These strategies include: Differential pricing, new product pricing, penetration pricing, product-line pricing, psychological pricing, and promotional pricing. The type of strategy that is going to be used depends on the product, target market, and the purchase situation.

Differential pricing occurs when different prices are charged to different buyers for the same quality and quantity of the product. New product pricing includes price skimming which results in charging the highest possible price that buyers will pay because of the desire they have for the product. This applies to the people who live by buying a particular brand and nothing else. For example, people may enjoy a certain brand of shampoo and I will pay anything for it because it is best for their hair. Penetration pricing is used by setting prices below those of competing brands to penetrate a market and gain a significant market share quickly. A good example of this I feel would be the new iPad. This product is reasonably cheap for the features that it offers, and competes with laptops. Product-line pricing establishes and adjust prices of multiple products within a product line. I think that this is a great strategy. Another example using shampoo would be the conditioner that comes with it. You will definitely buy that specific shampoo, and buy the conditioner that goes with it no matter what the price is because of the results. Psychological pricing attempts to influence a customers’ perception of price to make a product’s price more attractive. This would relate more to the branding of certain products. People will pay a price for quality, durability, and particular trends during that time. Promotional pricing is very attractive to customers because prices are set below the usual markup and look better to the buyers when compared with the original price.

I think that all companies should use promotional pricing at some point because customers are attracted to low prices. Penetration pricing seems to be the best pricing strategy to use because it involves pricing below the competition. As mentioned above, the pricing strategy depends on several factors which are all significant in different circumstances. Do you agree with this? Which pricing strategy do you believe is the most important to the buyer and seller?