Markiting - Essay Example

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The prices set for the products are relatively higher than the market and hence the profits increase with purchase on every product.
In this type of pricing strategy, the initial prices of the…
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Pricing Strategies The three pricing strategies that are discussed in this essay are skimming pricing strategy, penetration pricing strategy, and psychological pricing strategy.
Skimming Pricing Strategy
In this type of pricing strategy, high prices are set for products which give high profits to firms and prices are then gradually lowered with time (MarketingTeacher, 2).
Skimming pricing is used when the profit margin of the product needs to be maximized. The prices set for the products are relatively higher than the market and hence the profits increase with purchase on every product.
Penetration Pricing Strategy
In this type of pricing strategy, the initial prices of the product are extremely low, at times lower than the prices in the market. Low prices are set to attract huge amount of customers towards the product. Low prices make it tempting for the customer to switch to the new brand (MarketingTeacher, 1).
Penetration pricing is used when the objective of the organization is to increase the market share of the product. It is also used by organization when the marketing objective is to increase the volume of sales for the product.
Psychological Pricing Strategy
In this type of pricing strategy, prices are designed in an attractive way so that customers have a positive impact about the price of the product. The psychological impact is that customers assume that the prices are at the lower side (Gourville and Dilip, 93). For example, products may be priced $2.95 rather than $3.
Psychological pricing can be used for everyday products as customer has a greater use of everyday products and they would prefer to buy them on relatively cheap prices. On luxury products, customers may automatically round off the prices and hence psychological pricing may have no impact in such a case.
Works Cited
Gourville, John, and Dilip Soman. “Pricing and the psychology of consumption.” Harvard Business Review 80.9 (2002): 90-96. Print.
MaketingTeacher. “Pricing Strategies.” Agenda 40.2 (2010): 1-5. Print. Read More
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