Price Strategy for Business Market Essay Example | Topics and Well Written Essays - 3000 words

Price Strategy for Business Market - Essay Example Pricing decisions are highly complex, and organizational objectives are primary factors while deciding upon a pricing strategy. Price skimming, penetration pricing, mixed pricing, cost-plus pricing, variable pricing, marginal pricing, promotional pricing, and differential pricing are techniques used by organizations while developing their pricing policies. Price skimming involves offering a product or service for a premium on a low volume. The strategy is typical for new products or services in new markets, where a certain number of customers are willing to pay more for new innovative products or services. The process speeds up the payback period. When the product or service becomes popular and sales volume increase, prices come down. An example of this technique has been deployed in the mobile phone industry. Penetration pricing is a technique used for penetrating the market for gaining substantial market share, by setting the price low for high volume sales. The payback period is l ong, however, the strategy allows for the establishment of strong market position. The strategy has been deployed in airline industries and fast food businesses. Mixed pricing involves price skimming in the beginning, and penetration pricing when competitors enter the market. An example of this approach has been used in mobile communications. Cost-plus pricing is based on total cost of the product or service and addition of the margin. The disadvantages of the method include, pricing may be too high or too low.