Pricing policy

Pricing policy

1. Pricing Policies/Strategies

2. Pricing Policies constitute the general framework within which pricing decisions are made. They provide the guidelines within which management formulates and carries out pricing policies. It means that Pricing Strategies are the adaptation of Pricing policies A firm does not follow a single price policy, rather it needs a bundle of price policies to suit not only the firm and its pricing objectives but its overall marketing situation. As a general rule, pricing policy should aim at promoting long term welfare of the enterprise and maximising profit for the entire operation over the long run

3. Premium Pricing Use a high price where there is a uniqueness about the product or service. This approach is used where a substantial competitive advantage exists. Such high prices are charge for luxuries such as Cunard Cruises, Savoy Hotel rooms, and Concorde flights Penetration Pricing The price charged for products and services is set artificially low in order to gain market share. Once this is achieved, the price is increased. This approach was used by RCom in order to attract new customers.

4. Economy Pricing This is a no frills low price. The cost of marketing and manufacture are kept at a minimum. Supermarkets often have economy brands for soups, spaghetti, etc. Price Skimming Charge a high price because you have a substantial competitive advantage. However, the advantage is not sustainable. The high price tends to attract new competitors into the market, and the price inevitably falls due to increased supply. Manufacturers of digital watches used a skimming approach in the 1970s. Once other manufacturers were tempted into the market and the watches were produced at a lower unit cost, other marketing strategies and pricing approaches are implemented.

5. Premium pricing, penetration pricing, economy pricing, and price skimming are the four main pricing policies/strategies. They form the bases for the exercise . However there are other important approaches to pricing

6. Psychological Pricing This approach is used when the marketer wants the consumer to respond on an emotional, rather than rational basis. For example 'price point perspective' 99 cents not one dollar. Product Line Pricing Where there is a range of product or services the pricing reflect the benefits of parts of the range. For example car washes. Basic wash could be $2, wash and wax $4, and the whole package $6. Optional Product Pricing Companies will attempt to increase the amount customer spend once they start to buy. Optional 'extras' increase the overall price of the product or service. For example airlines will charge for optional extras such as guaranteeing a window seat or reserving a row of seats next to each other.

7. Product Bundle Pricing Here sellers combine several products in the same package. This also serves to move old stock. Videos and CDs are often sold using the bundle approach Promotional Pricing Pricing to promote a product is a very common application. There are many examples of promotional pricing including approaches such as BOGOF (Buy One Get One Free). Geographical Pricing Geographical pricing is evident where there are variations in price in different parts of the world. For example rarity value, or where shipping costs increase price.

8. Cost-based Pricing Cost-based pricing methods are fairly common. Price is determined by adding either rupee amount or a percentage to the product’s cost to achieve the desired profit margin. Cost-based pricing methods do not take into consideration factors such as supply and demand, or competitors’ prices. They are not necessarily related to pricing policies or objectives. Competition-based Pricing This approach is also called going rate pricing. Competition-based pricing pushes the costs and revenues as secondary considerations and the main focus is on what are competitors’ prices. This pricing acquires more importance when different competing brands are almost homogeneous and price is the major variable in marketing strategy, such as cement or steel.

9. Demand-based Pricing Companies using this method mainly consider the level of demand. The price is high when the product demand is strong and low price when the demand is weak. This approach is fairly common with hotels, telephone service companies, and museums etc. Perceived-value Pricing Many companies perceived-value pricing. In this approach the price is based on customer’s perceived value of a product or service. The company must deliver the promised value proposition it communicates to its target customers. And of course, it is important that customers must perceive this value. Marketers carefully use different elements of promotion mix to effectively communicate and enhance customers ’ perception of product or service’s perceived value