Quiz 19: Pricing Strategies

Business

Skimming pricing strategy: This strategy is also called marketing plus strategy which involves in the usage of the highest prices differentiated with competitive product prices. This strategy is generally used for the market entry price for the characteristic products with little competition. When supply goes beyond then the initial high price comes down. Penetration pricing strategy: This strategy involves uses of the lower price as the main weapon for marketing, where it is involved in the use of comparatively lowest entry price differentiated with competitive contributions emphasized on the principle where the original low price will assist secured market acceptance.

Market for luxury products during recession: In tough economic situations like recession, the market for premium products would face huge challenges. To sustain in the recession times, luxury brands will offer various discounts and bundled services to attract customers. There will be usage of many tactics in pricing so as to maintain the image in the consumers' mind and also to attract them for purchase during recessions. Each luxury brand handles a different strategy based on their requirements. Such promotions will also encourage the consumers to opt for multiple services. Pricing promotions that can be offered by luxury brands: The pricing promotion that can be offered by luxury retailers to build sales would be introduction of membership programs for the customers. This would greatly increase the loyalty of the existing customers towards the brand without tampering the premium image of the brand. The customers can be offered points for every purchase they make. These points will get accumulated as they purchase and can be redeemed by them at a later stage. This would encourage the customers to purchase the same brand repeatedly, thereby increasing the sales of the brand. The promotion strategy that must be used for attracting the new customers must be different from the strategy used for the existing customers. This is because the new customers need more information about the brand and would like to undergo some shopping experience before becoming loyal to that brand. In order to attract such new customers, the brands can initiate referral programs, where existing customers can refer a new customer and earn more points. Such new customers can be awarded with promotional offers and membership programs to make them repeated buyers.

Situation: D Computers launched its smart phone in the untapped markets to create brand identity. The company strategy is to create trustworthy consumer in the emerging markets. The company launched computers in these countries less than $500 initially, which is very much less than other countries. Penetration pricing strategy: It is a marketing technique used to attract customers in a new location, where it reduces prices in that particular location compared to other places, in order to get the brand identity. Justification: The company used this strategy in order to attract customer and to create brand awareness in these emerging markets. Due to application of this strategy in the countries like ID and CH the company is known everywhere and company created trustworthy customers as per their philosophy.