Advanced: Pricing Strategies

Pricing strategies are a more advanced aspect of business and can help to grow your sales. Implementing pricing strategies into the marketing and sale of your products can be very influential in generating more profits. 

1. 1. 1. Competitive Pricing: Competitive pricing is a pricing strategy where a company prices its product based on the prices of its competitors. A company may slightly reduce its profit margins (the degree to which a company makes money on a given product) by decreasing the overall price to compete with other products, but its overall profits may increase as it sells more units. Lower prices are more attractive to price-conscious customers, so lower prices can help build customer loyalty.

1. 1. 2. Premium Pricing: Premium pricing is a pricing strategy where a company prices its products higher than competitors to market its product as higher-end or more valuable. A higher price creates a higher perceived value (how much the customers think a product is worth) in the eyes of the customers while also increasing profit margins. It can also create a new brand image for a company as premium and high-end, attracting customers with more money. 

1. 1. 3. Penetration Pricing: Penetration pricing is a pricing method in which a company prices its product very low to break into new markets and build a customer base. Once a customer likes a product, they are often loyal to it even through mild price increases. Penetration pricing is often applied to new product launches to build customer bases quickly. 

1. 1. 4. Psychological Pricing: Psychological pricing involves pricing products based on the psychological impact of the prices. One very common example of psychological pricing is prices ending in .99 or .95, such as $19.99 as opposed to $20. A customer first sees the first digit of the price and uses that in deciding on whether or not to buy a product and having a 1 as opposed to a 2 in front looks like a better deal to many. 

1. 1. 5. Bundle Pricing: Bundle pricing involves offering products sold in groups to be cheaper individually than if sold alone. One example is a company marketing $10 for one product but $15 for two. This makes the customer feel like they are getting a good deal even when they wouldn’t have purchased two or even one product in the first place. Sales and deals are a very good way to generate sales.