Choosing the type of price strategy
Pricing strategies are very diverse (Figure 5.1).
So, depending on price level high, low and medium price strategies are singled out.
High Price Strategy
The goal is to get super profit by "skimming cream" from those buyers for whom a new product is of great value and who are willing to pay for the product purchased above the normal market price. The strategy is applied when the enterprise is convinced that there is a circle of buyers who will demand the demand for expensive goods. This applies, first, to new, first-appearing products on the market, protected by a patent and having no analogues, i.e. to goods in the initial stage of the "life cycle".
Fig. 5.1. Classification of price strategies
Secondly, to the goods focused on the rich buyers, interested in the quality, uniqueness of the goods, i.e. to a segment of the market where demand does not depend on price developments.
Thirdly, to new products, for which the company does not have a perspective, long-term mass sale, including due to lack of necessary capacities.
Fourth, to approbate the product, its price and its gradual approach to an acceptable level.
The strategy of high prices is justified in the following cases: there is a guarantee of the absence in the near future of significant competition in the market; For competitors, the costs of developing a new market (advertising and other means to enter the market) are too high; for the production of a new product, raw materials, materials and components are available in limited quantities; it may be difficult to sell new products (warehouses are filled, intermediaries are reluctant to conclude deals for the acquisition of new goods, etc.). By setting high prices for such products, the manufacturing enterprise, in effect, uses its monopoly (as a rule, temporary) on them.
The price policy in the period of application of high prices - to maximize profits until the market of new goods has not become an object of competition.
Average price strategy (neutral pricing)
Applicable in all phases of the life cycle, except decline, and is most typical for most enterprises considering earning a profit as a long-term policy. Many enterprises consider this strategy to be the most fair, since it excludes the "war of prices", does not lead to the emergence of new competitors, does not allow firms to cash in at the expense of buyers, makes it possible to obtain a fair return on invested capital. Foreign large and super-large corporations in most cases are satisfied with a profit of 8-10% of the share capital.
Low price strategy (price breakout strategy)
Applicable at any phase of the life cycle. It is especially effective at high elasticity of demand for the price. It is used in the following cases:
a) to penetrate the market, increase the market share of your product (a policy of repression, a policy of non-admission). This option is appropriate if the costs per unit of production are rapidly declining with the growth in sales. Low prices do not encourage competitors to create such a product, because in such a situation they give low profits;
b) loading of production capacities;
c) avoidance of bankruptcy.
The low-price strategy pursues the goal of obtaining long-term rather than "quick" profits.
Depending on different markets, their segments and buyers highlight the strategy of differentiated prices, the strategy of preferential prices and the strategy of discriminatory prices.
The strategy of differentiated prices. It is used by enterprises that establish a certain scale of possible discounts and premiums to the average price level for different markets, their segments and customers, the characteristics of the market and its location, the time of purchases and modifications of goods. Provides seasonal discounts, discounts for the amount of goods purchased, discounts for regular partners, etc., the establishment of different price levels and their ratio for different goods in the overall product range, as well as for each of their modifications. For this, a complex and painstaking work is carried out to harmonize the overall commodity, market and price strategy.
The differentiated price strategy is used in those cases when:
• The market is easily segmentable;
• it is possible to reimburse the costs of implementing this strategy at the expense of additional revenues as a result of its conduct;
• It is impossible to sell goods at low prices in those segments of the market where it is already sold at high prices;
• it is possible to take into account the favorable and unfavorable perception by consumers of differentiated prices.
The given strategy allows to stimulate or, on the contrary, to restrain sales of the various goods in different segments of the market. The strategies of preferential prices and discriminatory prices can be considered as variants of the strategy.
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