Psychological Pricing
Price says some thing about the product. For example, many consumers use price to judge the quality. A $100 bottle of perfume may contain only $3 worth of scent, but some people are willing to pay the $100 because this price indicates some thing special.
In using psychological pricing, sellers consider the psychology of prices and not simply the economics. For example, one study of the relationship between price and quality perceptions of cars found that consumers perceive higher - priced cars as having higher quality. By the same taken higher quality cars are perceived to be even higher priced than they actually are.
Another aspect of psychological pricing is reference prices-prices that buyers carry in their minds and refer to when looking at a given product. The reference price might be formed by noting current prices, remembering past prices, or assessing the buying situation. Sellers can influence or use these consumers' reference prices when selling price.
Even small difference in price can suggest product differences consider a product priced at $500 compared to one priced at $499.95. Actual difference is just 5 cents by psychological difference can be much greater. This is known as an odd pricing.
Promotional Pricing
With promotional pricing, companies will temporarily price their products below list price and some times even below cost. Promotional pricing takes several forms. Super markets and departmental stores will price a few products as loss leaders to attract customers to the store in the hope that they will buy other times at normal markups. Promotional pricing takes several forms and some of them are described below:
Loss leader pricing – It happens when retailers drop price on well-known brands to stimulate store traffic in the hope that customers will buy other items also at normal mark-ups.
Special even pricing- is used in certain seasons to draw in more customers.
Cash Rebates – Manufacturers will sometimes offer cash rebates to consumers who buy the product from dealers with in a specified time.
Lower-interest financing, longer-payment times, longer warranties –
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