Pricing Changes

Requires companies and people to consider reactions of customers and related competitors.

Knowing customer prices is something that helps to make an appropriate pricing decision. In addition, the price elasticity and way that customers will react to a price change is vital. Finding the optimum price for demand can help to maximize revenues for a mature product and mature price elasticity curve.

Basic economic principles can help to make basic desicions, after which research is needed to come up with a pricing stratagy plan.

Target Costing

Pricing that starts with the ideal selling price based of costs of products, then dictates costs that will meet company goals and ensure profits will be made.

Many companies set targets for sales to help investors guess how the yearly sales and profits will go. By setting these goals, this style of pricing prices the products in order to meet the goals and targets put forth in the beginning. Taking the cost of the products and charging an appropriate markup to meet these goals is how this is achieved.

Product Line Pricing

Optional Product Pricing:

Offering to sell optional and accessory product to companion a parent product. An example of this would be buying a smartphone and then needed accessory cases and screen protectors to go along with it.

Captive Product Pricing:

Is a strategy that uses products that need to be used with a parent product; however, the parent product needs the captive product to operate. For example a household sweeper that uses a spray bottle, the spray is needed to use the parent product and only one kind of spray is available.

By-Product Pricing:

Taking the By-Products of a parent produce and making them profitable. For example a product has waste from the production process of cardboard. Crushing and selling the extra cardboard to newspaper companies can be used to make extra cash.

Bundle Pricing:

Setting a certain price for a bundle of products is called bundle pricing. By having similar products and selling them together inventory can be liquidated and more product moved. Often a discount is offered when buying a bundle or in bulk.

Prestige Pricing

Includes setting a high price for a product that offers prestige in a personal setting.

This pricing stratagy is used for higher class products such as luxurey products. This can help to create a luxureous product as well, by pricing high, often a product can be seen as higher class or of better quality. Having higher margins on a product can also be risky, knowing how the customers and competition will react is vital to a successful strategy.

Market Penetrating Pricing

Includes setting a low price for a new product in a marketplace to attract customers to the product and create product demand and value, then raise the price as people fall in love with the product and are willing to pay more.

This type of pricing can be used for putting brand new products into the marketplace. A new product with little demand and knowledge can be put on at a lower price. This will create use and demand for the product, after which, the price could be raised to help maximize revenue. Changing prices must take customer demand and competitors into consideration.

Market Skimming Pricing

Includes setting a high price for new products in the marketplace to skim the maximum revenues from the marketplace layer by layer from the different market segments that are willing to pay the price asked.

This stratagy is great for new products that have an existing demand. A product can be launched at a price in which people that really want the product will buy it, then lower the price in increments will allow more people on the demand curve to purchase the product, taking as much revenue from each segment of demand as possible.

Break Even Pricing

Break even pricing is setting the price of a product on the costs of making and marketing the product. It is a good companion pricing strategy to market penetrating pricing. It allows for people to buy and create demand for a new product in bulk and can help foster the spread of knowledge about a product.

This strategy is also good for meeting goals. After setting a goal a product can be priced to meet or break even on a goal with no need to over or undershoot the goal.