Pricing Strategy

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In this article we explain Pricing Strategy, an important part of the Marketing Mix (Price) of a business.

Introduction

By making the correct adjustment in the marketing mix, a product or service can be succesfully vermarkt. The price plays an important role in here, it namely determines the income stream and hence a business’s continuity. By firstly researching the price-determining factors, a price strategy can be chosen. This article is a follow-up on Marketing Mix and Marketing Mix - Price.

What is a Pricing Strategy?

A Price Strategy is – as the name already suggests – a certain way in which a business handles the marketing mix instrument price. It is thus an important component of the marketing mix and determines the continuity of an organisation. Because a price strategy can be chosen, there must be insight into the price-determining factors in order to take a good and well-reasoned decision.

How do you determine the Price Strategy

Determining a price strategy is based on the following staged plan:

0. research phase (Optional) | Read more

1. create insight into the price-determining factors | Read more

2. choose a price strategy | This article

3. Then you take decisions while eyeing the competition (such as price lowering), discounts and the actual price. | This article

Price Strategy as part of the Marketing plan

Remark: point 0 is optional but often occurs because determining a price strategy is often a component of the marketing plan. In the research phase, research is conducted towards the. After that, strategies are developed and targets are formulated. In the last part of the marketing plan, future plans are translated into an action plan, here the marketing mix and hence the price-stelling also plays an important role. Decisions regarding the price are then taken based on the findings from the internal and external environments.

Pricing strategies

In the table below a number of viable pricing strategies.

Skim price strategy  a high price when introducing a product in order to quickly pay back the costs. Over time, the price falls down gradually.
Discount pricing  implement a (somewhat) lower price than the competitors
Competition-oriented pricing the competitors’s price serves as point of reference
End-price minus method fix a reasonable price that the consumer is willing to pay. Take away the margin from brokering. All that remains is for the products.
Dumping the supplier sells his products for a markedly lower amount than the average raised in a specific market.
Follow-the-leader  follow the leader’s price in the market
Cost-price plus method highten purchasing price with a fixed surcharge rate (profit rate or so).
Penetration price strategy  first apply a low price and then, over time, changing it into a higher price as soon as the market share is won from the competitors
Premium pricing apply a somewhat higher price and than the most significant competitors with the aim of putting a higher quality perception into work
Stay-out-pricing apply a low price in such a way that potential competitors are unable to enter the market
Price lining  offer a number of models or the entire product range for the same price
   

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Edwin Muilwijk

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