Price is perhaps the most crucial aspect of the marketing mix to determine whether customers make the purchase. If priced too low, you lose profitability. Priced too high, customers will choose a competitor. This article discusses several pricing strategies that businesses can use to get it right. Price is based on research, experience, and understanding of the market, to calculate a price expected to be profitable and sell enough volume to be sustainable as a business. Price also must stand its ground against alternative options from competitors. Pricing is at the core of marketing strategy, being one of the original ‘4Ps’ of the Marketing Mix. Changing core marketing strategies and new product development is expensive and time-consuming, but the price is very flexible, and business can change it according to the needs of the situation. Price is the most adjustable aspect of the marketing mix, allowing a business to quickly respond to marketplace changes. For customers, price is often the most crucial factor of their purchase decision. Businesses use price as a differentiating factor to set them apart from competitors and to target a segment of customers. Your price reflects your positioning in the market. Pricing helps create your brand identity. These slides discuss twelve ways a business can price their products or services.

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PRICING STRATEGY
Price is the value placed on a product or service in order to purchase it. It is based on research, experience,
understanding of the market and a calculation of a price expected to be profitable and sell enough volume to be
sustainable as a business. Price also must stand its ground against alternative options from competitors.
Pricing is at the core of marketing strategy, being one of the original ‘4Ps’ of the Marketing Mix. Changing core
marketing strategies and new product development is expensive and time-consuming, but the price is very
flexible, and business can change it according to the needs of the situation. Price is the most adjustable aspect
of the marketing mix, allowing a business to quickly respond to marketplace changes.

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FACTORS THAT INFLUENCE PRICE
Cost and or time. Or, what your time worth? Cost Plus takes into consideration production costs, then adds a
certain percentage of profit to that total. This is a basic way to price a product, and often business use more
than one pricing strategy in unison. There could also be other internal considerations within the business that
can impact pricing such as quality.
The perception of value in the minds of customers is another important contributing factor a business must
consider with their pricing. What do consumers think a reasonable price to pay is? Price and value will not
always align with customers, and this perception of value will change over time. The more a business
understands what their customers value, the easier it is to price your offering.

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FACTORS THAT INFLUENCE PRICE
What is your competition doing? What are their prices? How does their product or service compare to yours?
If there are similar offerings that are equally attractive at lower prices, you will have little market share.
Economics is going to impact your market and therefore your price also. What is the economy doing? Is there a
shortage of supply? How highly regulated is the market? We have recently had the Covid-19 outbreak around
the world, forcing changing business environments.
What is your positioning in the market and what segments are you targeting? Your price should reflect this. If
your branding is strong, it also influences the price buyers are willing to pay.

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BASIC PRICING STRATEGIES
Premium pricing uses a price structure that is higher
than many of your competitors. The premium price
alludes to the fact that the product or service is of a
much higher value.
Penetration strategy underprices a product or service
initially to gain market share more quickly. It is
common with a product launch, increasing the price
after this initial promotional period.
Economy pricing is a no-frills brand or range of
products that relies on a high volume of sales.
Margins are low as are any overheads such as
marketing costs.
Skimming pricing is initially charging a high price and
then lowering it over time. This strategy is useful until
the market has become saturated and is usually
reserved for brands with a first-mover advantage or a
strong competitive advantage.

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BASIC PRICING STRATEGIES
Low Quality and Low
Price
High Quality and High
Price
Start high then
reduce
Start low then
increase

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Loss leaders a store level strategy where high volume,
high profile brands such as Coca Cola are sold at an
unprofitable price to get customers into the store as
they are likely to purchase other products that are
more profitable.
Differential pricing uses the law of demand as the key
principal, recognising that certain customers are
willing to pay extra for a product based on the market
segment they belong to.
Competitive pricing is set by the market. Price is based
on competitors, using them as a reference point,
usually the same or marginally cheaper. This is a price
that you know customers are willing to pay.
Discounts and sales promotion are a very common
pricing strategy and sales tactic. Usually, a product or
service temporarily heavily discounted in price. Often
used to clear old stock.
MORE PRICING STRATEGIES

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Psychological pricing is used to trick customers into
getting a better deal than they are. A common tactic in
retail is pricing at $99.99 instead of $100.00. The lower
number is more attractive to purchasers.
Everyday low price is another store-level strategy, and
popular with large format retailers. Prices are kept low
and sales volume is high. Marketing costs are low as
discounts are not needed for store traffic.
Bundled pricing is when more than one product is sold
together at a lower than the price to buy the same
items individually. Buy one, get one free, is an example
of bundled pricing.
Captive pricing is where a primary product has
secondary consumables that customers must purchase
to be functionable. Razors for example. The initial
offering is cheap, but the consumables are not.
MORE PRICING STRATEGIES

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MORE PRICING STRATEGIES
Pricing
strategies
can be used
in unison
with each
other
Loss Leader
Competitive
Psychological
Differential
Price Discounts
Every Day Low
Price
Bundled Captive
More than one product
sold cheaper together
Products sold at cost or
below to get people instore
Matching the average
price in the marketplace
Pricing to trick the mind into
seeming cheaper – e.g. $99.99
More profitable accessory
products sold e.g. Razors
Different pricing for
different market segments
Reducing the price of the
product to increase value
Low prices everyday, little
advertising or marketing

10. Daniel Hopper
Marketing Specialist - BYB MARKETING
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