Pricing Strategy

Only available on StudyMode
  • Download(s) : 289
  • Published : December 10, 2010
Open Document
Text Preview
Price is simply the amount of money that consumers are willing to pay for a product or service (Armstrong and Kotler, 1993). In earlier times, the price was determined through a barter process between sellers and purchasers. In modern times, pricing methods and strategies have taken a number of forms. This paper is aim to explain the different types of Pricing strategies, more specifically the market-penetration pricing strategy. Pricing products, new products or existing products require the use of different strategies. For example, when pricing a new product, businesses can use either market-penetration pricing or a price-skimming strategy (Armstrong and Kotler, 2005) (Kotler, Brown, Adam, Burton & Armstrong, 2007). A market-penetration pricing strategy involves establishing a low product price to attract a large number of customers. By contrast, a price-skimming strategy is used when a high price is established in order to recover the cost of a new product (Armstrong and Kotler, 2005) (Kotler, Brown, Adam, Burton & Armstrong, 2007). In addition, Pricing objectives are established as a subset of an organization's overall objectives. As a component of the overall business objectives, pricing objectives usually take one of four forms: profitability, volume, meeting the competition, and prestige (Armstrong and Kotler, 2005) (Kotler, Brown, Adam, Burton & Armstrong, 2007). Also, In addition to the four basic pricing strategies, there are five price-adjustment strategies: discount pricing and allowances, discriminatory pricing, geographical pricing, promotional pricing and psychological pricing (Armstrong and Kotler, 2005) (Kotler, Brown, Adam, Burton & Armstrong, 2007). According to The Australian Financial Review's article" Mitsubishi Cuts Prices" which has been published in the 28th of April 2006, Mitsubishi announced price reductions with the introduction of the Series II upgrade. The entry-model, now called the ES, was reduced from $34,490...
tracking img