pricing Strategies Flashcards
Competitor-oriented pricing strategies
Def+Adv
Where they set their prices based on their competitors’ price. Can help companies stay competitive in the market and ensure that their prices are in line with their competitors.by regularly monitoring competitors’ prices, a company can adjust their own prices to remain competitive and avoid losing customers to their competitors.
Limitations of competitors’ pricing
By solely focusing on competitors’ prices, a marketing manager may not taking into account the quality, features and benefits of their own products.
Example of value based -BMW
For example, luxury car manufactured such as BMW offers premium cars that are prices higher than there competitors. However, customers are willing to pay the higher price for the brand name, better quality and luxury features that these cars offer. By adopting a competitor-oriented pricing strategy, those companies may be losing out on potential profits and undervaluing their unique product offerings.
Def. Value-based pricing
This strategy involves setting prices based on the perceived value of a product or service to the customer.
Example for Apple using value-based pricing
Apple is known for its premium pricing strategy, where they price their products based on the perceived value to the customer. Apple’s iPhone is priced significantly higher than it competitors, but consumers are willing to pay the premium price for the brand name, design, and unique features that the iPhone offers.
Disadvantage of value based pricing
It may not be effective in price-sensitive markets, and it can lead to a loss of market share to competitors who offer similar products at a lower price.
Promotional pricing def
This involves offering temporary discounts to attract customers and increase sales.
Example of promotional pricing/ IKEA
IKEA regularly offers discounts on selected products during holidays seasons to attract customers and drive sales. This pricing tactic not only increase sales but also creates a sense of urgency among customers to make a purchase before the promotion ends.
Disadvantage of promotional pricing
However, the disadvantage of this strategy is that it can damage a company’s brand value and train customers to only purchase products when they are on sale.
Penetration pricing def.
This strategy involves seeking low prices for products or services to gain market share and attract price-sensitive customers.
Example-penetrating pricing is Xiaomi
Xiaomi is a Chinese technology company that entered the smartphone market in 2011. Xiaomi initially offered smartphones at a significantly lower price than its competitors, which helped the company gain market share and establish awareness of its brand. As Xiaomi’s brand become more well-known, it gradually increased its prices while still offering value to its customers.
Drawbacks of penetration pricing
It may not be sustainable in the long run. Since the goal is to to attract customers with low prices, the company may struggle to maintain profitability over time, especially if they are unable to raise prices or cut costs.
Another drawback of penetration pricing
Customers may assume that a products or service that is priced significantly lower than the competition must be of lower quality, which can be difficult to overcome. This can be especially hard for companies that are trying to establish a reputation for quality or luxury.
