Pricing Strategies
Pricing Strategies The three types of pricing strategies are skimming, penetration, and competitive. Skimming pricing strategy is defined as a pricing strategy involving the use of a high price relative to competitive offerings (Boone and Kurtz, p641). Skimming can be used to introduce a new product slowly. This allows the distribution process to be able to keep up with the market. Sometimes called market-plus pricing, intentionally setting a relatively high price compared with prices of competing products (Boone and Kurtz, p641). When using this strategy, a company purposely assigns an exorbitant price to the product to set it apart from other products of the same kind. This can be useful to a company that believes that their product is superior to others in that market. They want to attract customers that look at the high price as meaning a superior product. Penetration pricing strategy is defined as a pricing strategy involving the use of a relatively low entry price compared with competitive offerings, based on the theory that this initial low price will help secure market acceptance (Boone and Kurtz, p642). When a company wants to introduce a product in a market that has a lot of competition, they may choose to offer it at an introductory price that is lower than the competition (Boone and Kurtz, p643). After the initial offering, the price goes up to the current market price. This allows the company to get their product from an unknown brand to one that is easily recognized. A store promotion may be used to get customers to shop at their stores by offering low sales or low to zero interest. Everyday low pricing is linked to penetration pricing strategy. With everyday low pricing retailers continuously offer low prices rather than relying on sales or rebates (Boone and Kurtz, p643). Retailers pledge to have the lowest prices. If they do not have the lowest price, they will price match their competitors. Competitive pricing
Cited: Boone, L. & Kurtz, D. (2012). Contemporary Marketing Mason, OH: South-Western Cengage Learning.