Question

Talk about the pros and cons to different pricing strategies (for example complex, hard to implement, amount of producer surplus generated).

Answer 1

Dynamic Pricing

Dynamic pricing works against market demands and enables firms to set flexible prices for their products / services. Under certain circumstances, businesses determine the willingness of customers to pay, and adjust their prices accordingly.
Pros: Allow price stability that represents periodic market demands.
Maximize profit margins by price rises.
Offer more services / goods during times of slow sales.
Cons: Consumers are irritated and confused by rising rates and lack of continuity.
Lose out to competition that provides lower prices in times of price rise.
Suffer loss to income as prices collapse during times of slow sales.

Freemium Pricing

Freemium pricing splits consumers of product / service into two categories-free and paid service. Free users have limited access to some features of the app, and paying users have complete unlimited access. This strategy works on the premise that free users will see the value of the quality of the free service when buying the full product. The free service's 'no strings attached' nature allows word-of-mouth ads popular to freemium pricing, and sign-up rates can grow very quickly.

Pros: Technically and efficiently represent product interest in a.
Foster free publicity via word-of-mouth recommendations.
Create brand loyalty by easing consumers into the product and increasing retention rates.
Cons: Lose income from consumers who are happy with its features.
Lessen the impression of product value by the consumers by making a free version available.
Increase consumer selling period use free service before prime adoption.

High-Low pricing

High-low pricing means setting a high (reference) price for a product / service and then lowering it during a sale / promotional time before raising the price once again. The reference price helps to represent the value and prestige of the commodity before being discounted. This strategy works by imposing a sense of urgency on the customers during the selling cycle to purchase the product. In these times, the general rise in traffic results in high sales as consumers more frequently buy full-priced goods as they arrive in store. High-Low pricing works best in instances where customers are not sure of what a product’s pricing should be in ordinary circumstances

Pros: Fix value by displaying the value of the commodity by higher pricing.
Drive the traffic in store and demand for goods through promotional efforts.
Generate higher selling volumes during selling by entering wider markets.
Cons: Discourage clients who may perceive the discounted product as lacking in quality / value.
Reduce benefit on advertising times.
Lose the sales for customers waiting for promotional sales during the comparison pricing period.

Price skimming

Price skimming is a practice that companies usually follow when a new product comes onto the market. A business sets the highest price customers are willing to pay for the new product before lowering the price over time to appeal to market segments which are more price-sensitive. Reducing the price also helps retailers to align themselves with some of the rival goods that emerge during that period. Effective marketing is essential for a successful price skimming strategy, because consumers need to believe that the product is of high quality and demand to support the higher price.

Pros: Gain maximum profit from the initial sales of the product.
Creating a positive picture of the brand by conveying product quality and value.
Company distinguish by setting higher prices than other goods on the market.
Cons: Initially separate the market by means of high pricing, which pushes the price sensitive markets away.
Lose sales to competition if prices are not reduced at the right time or to a reasonable level.
Reduce income as consumer demand declines and the price of the commodity rises.