Price is a strong element of marketing strategy of any company. Price has direct impact on the customer, customer buying behavior, business and on the overall economy. To customers the price is a major indicator of good quality product and also important factor in making decision about its purchase. Price strategy is therefore, most vital and critical area of marketing strategy. In deciding the price the business management and marketer must consider, the kind of competition in the market, elasticity of demand of that particular product and the cost of production.
Many Companies usually adjust their basic prices keeping in view various customer differences and market changing situations. If a company adopt effective pricing strategies, company become able to secure better market shares.
Types of Pricing Adjustment Strategies
There are six price adjustment strategies in marketing.
Discount and Allowance Pricing
Most companies adjust their basic price for rewarding their customers due to customer quick responses. Such as early payment of bills by customers, bulk purchases, and off-season buying etc, so in these cases companies offer certain amount of discount or allowance to their customers. Such price adjustments called discounts and allowances pricing strategies. Discount is a straight reduction in price by company on purchase while allowance is promotional money paid by company to retailer in respect of an agreement to feature the company’s product in some way.
In segmented pricing strategy, the company sells a product or service at two or more prices, and difference in prices not based on cost. There are several forms of segmented pricing like under customer-segment pricing, under product-form pricing and more. Museums are sample example of this as they charge a lower admission from students and senior citizens. Variation of theater or cinema seat prices is also an example of segmented pricing. Companies also charge different prices in different region for same products.
Psychological pricing strategy approach considers the psychology of different customers in respect of their products. Price actually says something about the product features and characteristics. For example, many customers use price to judge the quality of the product and services. For example a person wants to purchase perfume, he asks the price from shopkeeper and he told different prices of two bottles as 1000 for one and 400 for other. Now customer will be willing to pay 1000 because this higher price indicates something special.
Promotional pricing strategy promote or introduce a particular product or service. This is the temporary price companies charged for their products or services and this price may be below then list price and sometimes even below then incurred cost. Some supermarkets and departmental stores offers lower prices to attract customers. Promotional pricing may also have adverse effects for example constantly reduced prices can deliver a message to customer about lower brand's quality in the mind of customers.
Geographical Pricing is adopted by many companies now a day. In this pricing strategy companies decide to price its products or service for different customers on the base of geographical location in different parts of the country or world. This is actually relates to buying power of customers. Companies charge high prices in elite class areas and low prices in backward areas.
Many companies now a day’s launch their products internationally. Such companies need to decide what prices to they will charge in the different countries in which they operate. Some companies may also set a uniform worldwide price. International pricing strategy depends on many factors of a specific country like economic conditions, laws and regulations of that country, competitive situations in that country, and development of the wholesaling and retailing system in a particular country.