Pricing is the process by which a business sets the price at which it will sell its products and services. It may be part of the business’s overall marketing plan. When setting prices, businesses consider factors such as the cost of acquiring goods, manufacturing expenses, market competition, economic conditions, brand positioning, and product quality.
Typical marketing decisions include determining the price strategy, selecting appropriate price tactics, and setting prices. Additionally, they involve managing allowances such as rebates for distributors, offering discounts for customers, and defining payment terms, including credit options and payment methods.
Pricing strategies:
-
Operations-oriented pricing
-
Revenue-oriented pricing
-
Customer-oriented pricing
-
Value-based pricing
-
Relationship-oriented pricing
-
Socially-oriented pricing
Additionally, numerous pricing tactics exist, including:
- ARC/RRC pricing
- Complementary pricing
- Contingency pricing
- Differential pricing
- Discrete pricing
- Discount pricing
- Diversionary pricing
- Everyday low prices
- Exit fees
- Experience curve pricing
Methods of setting prices include demand-based pricing, multidimensional pricing such as mortgage pricing, and micromarketing, which applies to niche markets like microbrand clothing.
Trends in pricing:
-
Dynamic pricing – initially introduced in the travel industry, this approach adjusts prices based on demand fluctuations.
-
Behavioral pricing – pricing influenced by consumer behavior (e.g., Starbucks' pricing strategies).
-
Digital pricing – utilizing digital channels for real-time price adjustments.
-
Customized pricing – personalizing prices based on customer preferences (e.g., Subway’s build-your-own model).
-
Defendable pricing – in an era of price transparency, companies must establish defensible pricing strategies to counter global price comparisons and maintain margins.
-
Servitization – a shift from selling standalone products to offering a comprehensive solution that includes services around the product (e.g., Apple's ecosystem approach).
-
Sympathetic pricing – creating brand loyalty by aligning pricing strategies with customer values and experiences (e.g., Apple’s customer-first approach).
