It is based on demand for the product and the cost of producing it. Some special considerations can also influence the process. Pricing strategy involves the systematic manipulation or planning or pricing decisions and policies over a period of time in the context of achieving the broader objectives contained in corporate and marketing plans.
Companies must consider different pricing strategies when selecting prices. ‘Pricing to penetrate’ is a pricing strategy that uses a low profit margin to penetrate the market. It is designed to grab market share quickly.
Market share strategy – use to take share points away from competition.
While ‘skimming the cream’, on the other hand, is a strategy that uses high pricing to obtain high profits.
High option pricing strategy used when a product line is declining and competition is minimal or when the product line is new and there is little competition. This allows maximization of profits and relates to skimming strategy.
Pricing strategy
