Pricing strategies: options

Last modified:

Thursday 31 October 2019

Here are some of the classic pricing strategies:

"Premium" strategy

The price is set slightly higher than that of your main competitors. This strategy is based on the consumer's qualitative perception.  Such a strategy is notably used in the luxury products sector.

"Follow the leader" strategy

This strategy involves the selling price being aligned with the prices of the market leader or the average price charged by others in the market.  Example: mortgage annuities from banks

Penetration strategy (usually applied to new products)

The product is knowingly sold at a price below the market average.  The aim is to acquire a large market share in a short time even if the company has to (temporarily) accept a very small margin.  Once this objective is reached, the price is increased.

Economic strategy

The aim of this strategy is to set the price as low as possible. Marketing and production costs are reduced to their most simple expression in this case.  (e.g. supermarket brands, white label products, etc.)

Skimming strategy (usually applied to new products)

The product is sold at a relatively high price relative to the purchase price or the price of comparable products. This strategy justifies this price difference due to the innovative nature of the product or the added value it offers its target audience.  Therefore, you sell an exclusive product and demand a high price.  If the product becomes less exclusive over the years, you can then reduce the price.

"Put out pricing" strategy

This pricing strategy aims to force the main competitors out of the market by asking for a very low price relative to that of comparable products available.

"Stay out pricing" strategy (mainly for new markets)

The new market is invested in while selling the product at a low price to discourage the competition from investing in said market as well.

The retail trade also uses other pricing strategies, mostly based on the range of products or with the aim of using a certain product as a promotional item to increase their turnover. The sale combined with the psychological price setting are also methods commonly used. 

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