Question

Discuss the different pricing strategies a seller can use along with key features of each. Provide examples of current marketplaces where these types of pricing arrangements are shifting dramatically.

Answer 1

Competitive Pricing:

In pricing strategy competitive pricing is a concept where an organization considers its competitors price while setting price for its product or services. The drive here is the competition pricing rather than its own over heads of production cost.

The examples of competitive pricing are explained below:

1. The most important use of competitive pricing is capturing the market share by avoiding price competition.

2. In order to maintain the level of equilibrium competitive pricing is used.

3. While there are n number of similar products in the market, attracting customers can be done through competitive pricing.

4. Adopting the competitive pricing is a kind of price that is fairly simple with low risks.

5. Competitive pricing is the strategic based pricing which in most of the time can be accurate.

6. It provides opportunities to many start-ups to easily fix their price.

7. The idea of simplifying price try out can be done with this cost strategy for a short term business.

Prestige Pricing:

Prestige pricing can be defined as a pricing strategy where the price is fixed higher in order to reflect the quality characteristics of a product or service. It is to convey the idea that the product is a high end product.

Prestige pricing examples are provided below:

1. Pricing strategy becomes effective by convincing the customers that the particular brands product is of a good quality than the competitors’ product.

2. In order to create prestigious brand image in the market this prestige pricing is used as a strategy and this in turns become effective by providing best customer experience.

3. This strategy becomes effective when the company keeps their service exclusive and high on quality perception.

4. The consumers in turn perceive more value if the product is priced high and they are even ready to offered the same.

The cost based pricing and value based pricing strategies are explained below:

Cost Based Pricing	Value Based Pricing
The cost based pricing always focus on the cost involved in the production or service offered to the customers.	The value based pricing always target on the end customers.
Money needs to be spent to determine and set the price to make a profit for the business.	It determines the value provided to the customers and then helps to set the price for the product, service etc.
Through competitor analysis a price would be set and the information needs to be collected according to that.	More information would be collected from the potential customers as that helps to set the price.