penetration pricing is based on what assumption

#Penetration pricing is based on what assumption for free#

Louis is a famous example of a business operating successfully using the pay-what-you-want pricing strategy. Unlike how it seems, this pricing strategy often leads to more profits and increased market share as most of the customers pay amounts which are more than the cost price of the product.Īlthough many businesses set a minimum price and use a partial version of this pricing strategy, many refrain from setting a floor price. Pay what you want is a pricing strategy where the power of deciding the price of a product is given to the buyers, who pay their desired amounts for a product, which could even be zero.

#Penetration pricing is based on what assumption for free#

Freemium ExampleĬandy Crush Saga is a great example of a freemium pricing strategy where the game is provided for free but a price is levied if you want more lives to play. Freemiumįreemium is an Internet-based pricing strategy where basic services are provided free of charge but charges are levied on additional premium features. The freemium strategy is different from the premium with free samples strategy as you don’t pay anything to utilize the free services provided under the freemium business model. Mcdonald’s happy meal is a perfect example of bundle pricing. This is an effective strategy to bundle unsold products or products with less demand with the high selling products to clear up the shelf space and increase the profits.īundling works wonders when two complementary products are bundled together. For example – printing a double price label showing a regular price and a sale price, keeping a higher-priced and medium quality product along with a lower-priced but good quality product to increase its sale, etc.īundle pricing involves selling packages or sets of goods or services at lower prices than they would have actually cost if sold separately.

Price Anchoring: Anchor price is the first (higher or lower) price communicated to the customer to make their mind revolve around that price and buy the product the retailer wants.

This strategy is often used to clear up the stock or increase the volume of sales.

BOGOF: Buy one, get one free offer triggers the greed among the customers as they get two products for the price of one.

Prestige Pricing: This involves rounding off and setting a higher price for premium and exclusive products as rounded figures are easily processed and are preferred in such cases.For example – the price of a $3 product is set as $2.99 in supermarkets as customers’ brains process $2.99 to be nearer to $2 and not $3. Charm Pricing: This involves reducing the price by a minimal amount (say 1 cent) which makes the customer perceive the price to be less.Psychological pricing refers to the psychological pricing strategies marketers use to make customers buy the products, triggered by emotions rather than logic. Smartphones (both iPhones and Android) are introduced in the market at a higher price, but the price is reduced as time passes. The initial high price not only helps the business to recover its development costs but also gives the product perception of being an exclusive and premium product. The strategy got its name from successive skimming of layers of cream or the customer segments as the prices are lowered over time. The idea is to maximise the profits on early adopters before competitors enter the market and make the product more price sensitive. Price Skimming is a strategy of setting a relatively high introductory price of the product when the product is new and unique and the market has fewer competitors. The consumer never gets to test if the branded is better, yet he buys the branded offering thinking if it’s expensive, it must be better. Premium Pricing Exampleīranded unleaded petrol is sold at a higher price than regular unleaded petrol.

Spending a substantial amount on building a premium or luxury brand helps the business create a barrier for the competitors to position their products in the same class. The premium pricing strategy has the advantages of producing higher revenues and building a premium brand image. However, to make this pricing strategy a success, a business has to work really hard on the quality of the product and the brand to create a value perception. The idea is to encourage a perception among the buyers that the product has a more utility or a higher value when compared to competitors’ products just because it is sold at a premium price. Premium pricing, also called image pricing or prestige pricing, is a pricing strategy of marking the price of the product higher than the industry standards/competitors’ products.