Which pricing method sets the price of the product on what the customer is willing to pay?
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Definition: Price is the value that is put to a product or service and is the result of a complex set of calculations, research and understanding and risk taking ability. A pricing strategy takes into account segments, ability to pay, market conditions, competitor actions, trade margins and input costs, amongst others. It is targeted at the defined customers and against competitors. Description: There are several pricing strategies: Premium pricing: high price is used as a defining criterion. Such pricing strategies work in segments and industries where a strong competitive advantage exists for the company. Example: Porche in cars and Gillette in blades. Penetration pricing: price is set artificially low to gain market share quickly. This is done when a new product is being launched. It is understood that prices will be raised once the promotion period is over and market share objectives are achieved. Example: Mobile phone rates in India; housing loans etc. Economy pricing: no-frills price. Margins are wafer thin; overheads like marketing and advertising costs are very low. Targets the mass market and high market share. Example: Friendly wash detergents; Nirma; local tea producers. Skimming strategy: high price is charged for a product till such time as competitors allow after which prices can be dropped. The idea is to recover maximum money before the product or segment attracts more competitors who will lower profits for all concerned. Example: the earliest prices for mobile phones, VCRs and other electronic items where a few players ruled attracted lower cost Asian players. These are the four basic strategies, variations of which are used in the industry.
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What are the 4 types of pricing methods?There are 4 Pricing Methods that can help you put a price on what you sell: replacement cost, market comparison, discounted cash flow/net present value, and value comparison.
What are 3 pricing methods?Cost-Based Pricing. Value-Based Pricing. Competition-Based Pricing.
Which method is used for pricing?Hence the most common method used for pricing is cost plus or full cost pricing.
Which is the best method of pricing?Value pricing is perhaps the most important pricing strategy of all. This takes into account how beneficial, high-quality, and important your customers believe your products or services to be.
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