Marketers use penetration pricing when they need a new product to capture a large share of the market. By setting initial price lower than their competitors, they can draw customers away from competing products and gain market entry. An example of this penetration pricing is the Kia Soul.
With a starting price of $13,300, the Kia Soul has been very successful at attracting a lot of attention from buyers. While some might question the reliability of such a low priced car, this is a perfect entry level vehicle for younger consumers and is priced to attract them into dealerships. Of course after upgrades and other expenses the real price may be much higher, this initial low price has been successful at generating a great deal of attention which will most assuredly lead to an increase in market share.Another pricing strategy is odd pricing. The perception of the consumer is that anything odd priced is at bargain prices. The most obvious example of this that consumers see on a daily basis is gas prices.
Not only are gas prices always an odd number, they are actually 1/10 of a cent from being even! This is the ultimate in odd pricing, so much so that consumers aren't even aware of it most of the time.
This pricing method is highly effective in marketing prices to the consumer. Given a gas price of $2.57 and 9/10 or $2.58, consumers will be attracted to the odd price with a perceived sense of discount pricing.
Gas stations are very effective at employing this method and it can be at gas stations all around the country.
The act of setting a very high initial price is the act of skimming. Companies are able to do this if they have the only product in a category and the consumers are willing to pay a premium for it. T
hey will eventually lower the price as other competitors enter the market, but take the high margins while they can. A great example of price skimming is television technology.Anybody who wants to be on the cutting edge of television technology should expect to pay a large premium over the standard technology. There always seem to be a newer, greater than before technology available too. This shows the success that companies have in reaching the techno junkies who crave the newest technology and are willing to pay the extra price that companies charge. An example of this in use today is the new 3d technology being employed Samsung. Their 55" 3d TV is listed on their website for $6,999.99, a a large amount higher than their standard 55" television.
A marketing technique where a product is priced for very little profit in order to attract consumers to high profit products is known as a loss leader strategy. A new example of this made prevalent by the internet is music. With albums and songs being openly traded, legally or illegally, online, music artists can longer rely on their music sales as a form of income. Artists now must hook the consumer with free or relatively inexpensive prices for their music and attract them to their concerts where they might pay high prices for tickets and memorabilia. An example of this is www.artistdirect.com, part of the 'rogue network' of artists who are offering free content to gain exposure and fan base. This appears to have been successfully employed by artists who earn the respect and following of fans by not looking to be driven by sales and profit.
The multiple unit pricing strategy is a method of offering a discount for buying multiple products for one low price. This is most effectively employed on a daily basis at any local grocery store.
Take this advertisement for Fry's in Cave Creek as an example.
This whole page page was dedicated to multiple unit pricing. It is very effective at grabbing the consumers attention and it screams bargain.
This specific example is being well used to show that not only are these products a great deal, but it also seems as if the whole store is on sale!
With multiple product categories that might encompass the a large percentage of a shopping list, this advertisement does a very good job at drawing in the consumer to the store, but will also more than likely make them go to every aisle in search of deals and end up doing all of their grocery shopping at that store.
These have all been examples of product pricing techniques for specific products. There are some companies, however, that use pricing as a positioning strategy. These companies either want consumers to look at them as the high end, high quality manufacturer, or the company they go to if they just need to get a product at a bargain. To make a comparison, we will look at two watch companies, Breitling and Timex.
Touted as an 'instrument for professionals,' Breitling has positioned themselves a high end watch manufacturer of the highest quality and precision. Their prices are suited accordingly. Take a look at this Breitling Blackbird priced at around $5,000.
This price point has effectively positioned them as a high end luxury watch in the same market as Rolex. They are found in jewelery stores and other high end retailers where you would expect to find high value products. You would not expect the next watch to be in the same display case competing for market share.
This is the Timex Expedition, a $60 watch found in every Walmart and Target. Timex has positioned themselves as the everyday watch with affordable pricing and durable products. People know that when they buy a Timex, they are buying a watch that will look decent, be inexpensive, and work well. This position is reflected in their price. You would not expect to pay thousands of dollars for a Timex.
Breitling and Timex are two examples of how companies can effectively position themselves using pricing.
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