Question

In your own words, briefly define the below pricing strategies. Think of about current products for sale, and provide an example of each strategy. Do not use the examples from the book or from the lecture notes (Marketing Mix PDF's). Reference the Price PDF to help you. Cost based pricing Value based pricing Competition based pricing Penetration Pricing Price Skimming

Answer 1

Cost based pricing

it involves calculating the cost of he priduct, and then add a percentage mark up to determine price.

for example, total cost for prodcing 10000 units 10

add mark up 200% of cost 20

Selling price= cost+mark up 30

cost per unit

Vaue based pricing

this strategy that uses the value customer's gain from the product or service as the basis for the cost , ignoring the cost of production. value.

iPhone are the grate example of this strategy, becouse the manufacturing cost significantly less than the market price.

Competition based pricing

A pricing method in which a seller uses prices of competing products as a benchmark instead of considering own costs or the customer demand.

For example, a fime needs to price a new coffee maker, the firms competitors sell it at 25, and the company considersthat the best price for the new coffee maker 25 . it decides to set this very price on their own product. this pricing method can also be used in combination with other methods such as penetrtion pricing.

Penetration pricing

it is instead of going to maket with a high price, companies using a penetration pricing strategy have a low priced solution in order to capture as much market share posible.

For example , expense management software expensify users a penetration pricing model in combination with product led growth. its only works if the solution can achive economise of scale since high volume has to compensate for the low per unit price.

price skimming

when you have a very high price that makes your product only accessible upmarket. it is typically associated with luxury items and only works if you have a product or services that is highly vauable or perceived as highly valuable.

For products you could continue to use a price skimming strategy with new releses and lower the price of previous versions. Or productand service providers can offer economy version of their solution to appeal down market. if there is more demand for your solution than there is supply and you have brand equity, it is possible to grow while keeping your high price