8/24/2023 0 Comments Penetration pricing marketingProduct line pricing seldom reflects the cost of making the product since it delivers a range of prices that a consumer perceives as being fair incrementally – over the range. For example car washes a basic wash could be $2, a wash and wax $4 and the whole package for $6. Where there is a range of products or services the pricing reflects the benefits of parts of the range. Would you automatically by the cheapest? Would you buy the most expensive? Or, would you go for a lawnmower somewhere in the middle? Price therefore may be an indication of quality or benefits in unfamiliar markets. Let’s say that you’re buying a lawnmower for the first time and know nothing about garden equipment. ![]() Maybe you’re entering an entirely new market. What would you like, an ice cream at $0.75, $1.25 or $2.00? The choice is yours. Consumers might practice a decision avoidance approach when buying products in an unfamiliar setting, an example being when buying ice cream. It’s strange how consumers use price as an indicator of all sorts of factors, especially when they are in unfamiliar markets. For example Price Point Perspective (PPP) 0.99 Cents not 1 US Dollar. This approach is used when the marketer wants the consumer to respond on an emotional, rather than rational basis. However there are other important approaches to pricing, and we cover them throughout the entirety of this lesson. The diagram depicts four key pricing strategies namely premium pricing, penetration pricing, economy pricing, and price skimming which are the four main pricing policies/strategies. New products were developed and the market for watches gained a reputation for innovation. 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. Manufacturers of digital watches used a skimming approach in the 1970s. ![]() Taking Sky TV for example, or any cable or satellite company, when there is a premium movie or sporting event prices are at their highest – so they move from a penetration approach to more of a skimming/premium pricing approach. Once there is a large number of subscribers prices gradually creep up. These companies need to land grab large numbers of consumers to make it worth their while, so they offer free telephones or satellite dishes at discounted rates in order to get people to sign up for their services. This approach was used by France Telecom and Sky TV. Once this is achieved, the price is increased. The price charged for products and services is set artificially low in order to gain market share. ![]() However price is a versatile element of the mix as we will see. The argument is that the marketer should change product, place or promotion in some way before resorting to pricing reductions. Marketing companies should really focus on generating as high a margin as possible. In terms of the marketing mix some would say that pricing is the least attractive element.
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