Pricing strategies

If a product finds its way onto the market, the price strategy for the product must be determined beforehand. This is to take account of the situation on the market.

Fixed price strategy

High price strategy - The price of the products should be well above the market average. However, this is only possible for products that enjoy a high reputation and are of high quality. Reasons for this can be a desired quality leadership or a brand strategy (e.g. with luxury brands).

Low price strategy - With the low price strategy, the price level is set low. This succeeds in that the company saves and optimizes all costs. The company only attracts customers with a low price. This can displace any competition in the market.

The low price strategy thus serves as an advertising argument for the product. True, this kind of complicates the Pricing policy the competition to enter the market, but should a cheaper provider establish itself on the market, the company still loses its customers to them.

Price differentiation - The entrepreneur charges different prices for the same service. When it comes to price differentiation, a distinction is made between spatial, temporal and personal price differentiation:

  • Spatial price differentiation: the same product is offered in different markets at different prices
  • Temporal price differentiation: These are used for seasonal products (e.g. vacation trips)
  • Personal price differentiation: The price differentiation is based on different groups of people (e.g. student discounts or benefits for pensioners

Price sequencing strategy

Skimming strategy - The company starts with a high starting price, which steadily decreases over time. The maximum price is skimmed off from each group of buyers. With new products you want to skim off the willingness to pay in every class of buyers. This strategy is often used in the tech industry (e.g. new smartphones).

Penetration strategy - In contrast to the skimming strategy, the company starts at a low price for the product, but increases it slowly later. This is intended to attract a large number of customers at the beginning so that the product can establish itself on the market. Competitors can be deterred by low prices. As a result, the company can then raise the price.

Price competition strategy

The price competition strategies are similar to the fixed price strategies. However, the price changes over time.

Price leader - In the market under consideration, the price leader has the highest price and also the highest market share.

Price follower – Preisfolger passen ihre Preise denen des Preisführers an – sie consequences dem Preisführer bei der Preisgestaltung. Dennoch liegen ihre Preise immer etwas unterhalb von dem des Preisführers.

Price fighters - Price fighters have the lowest price on the market and try to weaken competitors and secure a higher market share for themselves.

Target cost accounting

Here, the product costs and the service costs are to be adapted to market needs. This is done with consideration of the customers' willingness to pay, which is determined by observing the market, which therefore requires detailed cost planning.

The price of the product thus determines the cost of the same. The production and the costs are linked to a realistically expected price.

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