Pricing Strategy
Chapter: 11
Lec: 8b
Price Adjustment Strategies
• Segmented Pricing
Selling a product or service at two or more prices,
where the difference in prices is not based on
differences in costs.
customer-segment pricing
e.g. Museums, students and elderly people pay
less price for the ticket
Price Adjustment Strategies
• Segmented Pricing
-product form pricing
e.g. the bigger the size of the mineral water
bottle the price will not change like that
Small Rs. 10, Medium……
- Location pricing
e.g. Universities charge higher price for out of
country students (international students)
Price Adjustment Strategies
• Segmented pricing
Time Pricing
e.g. Cinema charges higher tickets on
weekends
- Airlines ticket vary within minutes
Price Adjustment Strategies
• Psychological Pricing
A pricing approach that considers the psychology
of prices and not simply the economics; the price
is used to say something about the product
- higher price, higher quality
• Reference pricing
Prices that buyers carry in their minds and refer
to when they look at given product
Price Adjustment Strategies
• Psychological Pricing
e.g. -Buy one get one free
-Buy one get other at half price
-Sale
-Rs. 99
Price Adjustment Strategies
Price Adjustment Strategies
• Promotional Pricing
Temporarily pricing products below the list
price, and sometimes even below cost. To
increase short-run sales
-Adverse effects
Customers will wait for the sale
Competitor will follow
Price Adjustment Strategies
Price Adjustment Strategies
• Geographical Pricing
Setting prices for customers located in different parts of
the country or world
- FOB (Free on Board)
A geographical pricing strategy in which goods are
placed free on board a carrier, the customer pays the
freight from the factory to the destination
Factory------customer freight-----Destination
Price Adjustment Strategies
• Uniform delivered pricing
A geographical pricing strategy in which the company
charges the same price plus freight to all customers
regardless of the destination
Factory--same freight for everyone---destination
• Zone pricing
A geographical pricing strategy in which the company sets
up two or more zones. All customers within a zone pay the
same total price; the more distant the zone, the higher the
price
Factory—freight according to zone--destination
Price Adjustment Strategies
• Dynamic Pricing
Adjusting prices continually to meet the characteristics and
needs of individual customers and situations
- change in the fixed price policy
• International Pricing
different prices in different countries
e.g. McDonalds
Gucci
Price Adjustment Strategies
Price Changes
• Initiating Price changes
Buyer and competitor reactions should be anticipated
- Initiating Price Cuts
- Excess Capacity
- Falling demand due to competition
- ‘low’ price as promotion
e.g. “Big Bazar”…India’s Republic Day as “sab say sast
din”
e.g. CNG Stations
Price Changes
• Initiating Price Increases
- a successful price increase can increase profits
- make low visible price increase
- justify your price increase
- avoid direct price increase
e.g. start charging for food during an air travel
- extra luggage!, pillow, blanket
Price Changes
• Buyer Reaction to price changes
- Increase (quality is increased or they are
charging too much)
- Cut (Quality is decreased, getting rid of excess
things, concerned about us)
e.g. Tiffany
• Competitors reaction to price changes
Price Changes