Pricing products
Price –Demand Relationships
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- 6. Competitors’ Prices and Offers
- New product pricing Strategies
- Prestige pricing
- Market penetration pricing
| 4. Price –Demand Relationships: Each price a company can charge will lead to a different level of demand. The relationship between price charged and demand - inversely related, i.e. the higher the price the lower the demand.
5. Price elasticity of demand: if demand hardly varies with a small change in price, we say that the demand is price-inelastic. If demand changes greatly, we say that the demand is elastic. Buyers are usually less price-sensitive when products are unique, high in quality, has no substitutes, etc. 6. Competitors’ Prices and Offers: Competitors’ prices and their possible reaction to a company’s own pricing moves are other external factors affecting pricing decisions 7. Other external elements: When setting prices the company must also consider other factors in the external environment.Economic factors such as inflation, boom, and recession, and interest rates affect pricing decisions. New product pricing Strategies New product pricing strategies pricing strategies usually change as a product passes through its life cycle.Several options exist for pricing new product: Prestige pricing, market skimming pricing, and market penetration pricing. Prestige pricing: Hotels and restaurants seeking to position themselves as luxurious and elegant will enter the market with a high price that will support this position. Market Skimming Pricing: Price skimming is setting high price when the market is price insensitive. It makes sense when lowering the price will create less revenue. It can be an effective short-term pricing policy. Market penetration pricing: Rather than setting a high initial price to skim off small but profitable market segment, other companies set a low initial price to penetrate the market quickly and deeply, attracting many buyers and winning a large market share. Download 23.6 Kb. Share with your friends:
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