Marketing Mix – 4 Alternative Pricing Strategies

Price is an important part of your marketing mix strategies. The price can help or hinder the sales of your product or service. Given that your product is of good quality, that it has the features and benefits that your buyers want and need, that it stands apart from your competition, and that you have a good cost structure and a good and strong distribution and promotion program, your price strategy for your product or service may or may not help you sell it. Pricing strategies can have a very direct impact on increasing your market share.

Four Alternative Pricing Strategiess for your business are:

• Generic or cheap prices. This strategy deals with generic or economy brands with a low price: the value for the buyer is in the low price. Your business approach for this pricing strategy should be based on a low cost structure, minimal features, minimal promotion but solid (not fancy) benefits.
• Differential prices. With this strategy, you can choose to price your product differently depending on the type of buyer (eg, retail store, online store, department store), by geographic region (eg, the market for California may have a higher price than Illinois), by purchase volume (e.g., a customer buying a large volume would receive a different price than a customer buying a small volume), by national account segment (for example, you can negotiate a special differential price with a domestic account versus the price you would charge a local account). With all these differential prices, there must be a justifiable reason for the price differences.
• premium price. This strategy is commonly used for luxury items or high-value goods such as expensive jewelry, ships, planes, property, etc. Only use this strategy if the value of your product is recognized by your market as a premium or luxury good.
• Prices of captive products or complementary products. This pricing strategy is also used in product line pricing. This strategy groups, and often packages, similar products for price as companions (for example, a blender and mixing bowl) and as captives (for example, think you have to have a specific refill (not generic), razors that can only use a specific blade, etc.). Captive or add-on products are often priced based on packaging to offer the two products in one package (for example, a trial pack of blades with the razor, a pen refill packaged with the pen or the reloading tape with the tape dispenser). Then, when those blades, refills, or other add-on products are used, the price to purchase new blades, refills, or other products is significantly higher than the original package price.

Thoroughly analyze your product, your buyers, your competitors (and their potential actions and reactions), and your market before deciding which pricing strategy best suits your business. Then, review the pricing strategy by product and by product line periodically to make sure the fit is still the best.