For what types of products might marketers use market skimming pricing

Types of Pricing Strategies in Marketing by Marla Currie - Updated September 26, Product pricing must conform to going industry and category levels. However depending on quality, features and benefits, and even a unique selling proposition manufactured through advertising, a product can price itself at the higher range of category pricing. There are a number of prevailing pricing strategies used in marketing. Price Leader A product that has a demonstrated benefit or attribute over other products in the same category can price itself far above the prevailing pricing rates.

For what types of products might marketers use market skimming pricing

The reason for this importance is that where the rest of the elements of the marketing mix are cost generators, price is a source of income and profits.

Through pricing, the organization manages to support the cost of production, the cost of distribution, and the cost of promotion.

Simplistically, price is the value measured in money term in the part of the transaction between two parties where the buyer has to give something up the price to gain something offered by the other party or the seller. Pricing is a complicated element, which needs to reflect supply and demand, the actual value of the object, and the perceived value of it in the mind of the consumer.

A price that does not reflect these factors and is either too high or too low will lead to unsuccessful sales. There is often a tendency for marketers to focus more on activities like promotion, product developmentand market research while prioritizing their responsibilities.

These are often perceived as the more interesting aspects of the product and marketing mix.

For what types of products might marketers use market skimming pricing

However, pricing needs to be given its due attention since it has great impact on the rest of the activities and the company. Pricing is of vital importance because of the following reasons. In comparison, a change to the product or to a distribution channel can take months and sometimes significant cost inputs.

Similarly any promotion decisions will also require additional financial input. Though it is important to plan for pricing changes and their impact on the brand and product perception, this can still be accomplished much faster than any other changes.

Define the Right Pricing Any pricing decisions for a product need to be made through proper research, analysis and an eye on strategic objectives for the organization and the product. A decision made too quickly with superficial assessment can result in a loss of revenue.

For what types of products might marketers use market skimming pricing

A price below the perceived value can lead to both a loss in potential additional revenue and a target audience that judges the quality of the brand through price points. If this price is raised later on, the existing customers may feel like they are being unfairly burdened.

A price set too high can result in potential buyers staying away altogether. Pricing is often done by a team of experts who spend time conducting research that considers all variables of the market and brand. Pricing as a Trigger for First impressions In some product categories, a consumer will form a perception about its quality and relevance as soon as they see the price.

Eventually, the decision to buy or not may be based on the perceived value of the entire product or marketing mix offering. But there is always a danger that the first impression triggered by the price point will either make the rest of the offering irrelevant or it will be a biased assessment.

Pricing as a Key to Sales Promotions Sales promotions are often a short time price based offering such as a percentage reduction or a two in one type offer.

5 of the Best Penetration Pricing Examples

These are meant to generate interest in the product or make use of a special occasion or event. Used wisely, this can be a useful method of increasing sales but the company must avoid the temptation to offer these special prices too often.

In this scenario, buyers will put off purchasing the product till the next sales promotion of price reduction. And get regular tips and tricks on topics such as marketing, financing, strategy, and management, so you can start and grow your company more successful. Often, these objectives include: Keeping in mind revenue and costs, a company may want to maximize profits.

Profit maximization objectives should be long term and not focus only on the short term. With less focus on profits, a company may focus on increasing revenues in order to increase market share and lower costs in the long term.

A company may want to sell a specific number of items to decrease long term costs.


Another objective may be to increase the profit margin for each unit and not focus on the total number of units sold. A company may want to use price to signal high quality and establish itself as the quality leader. If an organization has multiple revenue streams, it may not be too focused on recovering a hundred percent of its costs.

Sometimes, the best a company may want to do is to cover costs and to remain in the market. If the market is in decline or there are too many competitors, survival may take temporary priority over profit. There may be a need to avoid price wars with competitors. So a company may maintain a stable price to continue a stable profit level.

Some of these pricing strategies are the following. Penetration Pricing A low price is set by the company to build up sales and market share.The comparison between skimming pricing and pen┬şetration pricing is that high skimming price policy needs vigorous and costly promotional effort to back it but low penetration price would require low promotional expenditures.

Penetration pricing relies on a low upfront price to attract customers, while skimming is the use of high upfront prices to maximize short-term profits from the most eager and interested customers.

In pricing innovative new products, a company can use _____ by initially setting high prices to maximize the amount of revenue from various segments of the market.

market-skimming pricing A company can use _________ by setting a low initial price to . Market-skimming pricing and market-penetration pricing. (seeks a market for by-products to help offset the costs of disposing of them and to help make the price of the main product more competitive).

For example, a papermaking company uses chemical by-products to sell to a road materials company Marketing: Pricing Strategies. . For What Types Of Products Might Marketers Use Market Skimming Pricing ´╗┐PRICING METHODOLOGY Pricing methods adopted by an organization determines the values attached to its products Pricing determinant can be Internal or External.

An Internal pricing determinant is one that is controlled by the marketer while the external is not . Skimming pricing is used when a product, which is new in the market or just launched, is sold at a relatively high price because of its uniqueness, benefits to customers or its current Wow factor.

However, slowly but surely when the product gets older in the market, then the price is dropped and the product is brought at competitive pricing.

Price skimming - Wikipedia