6.12:
Price Adjustment Strategies I
Price Adjustment Strategies enable businesses to adjust their prices in response to shifts in consumer demand and the competitive landscape.
These include Discounts, where prices are reduced to incentivize early payments or bulk buying to boost short-term sales and reward loyal customers.
The trade-in allowance offers reductions for returning old items when buying new ones, leading to sales growth and customer retention.
Another strategy is Segmented pricing, where different prices are set for the same offering based on customer segments, product forms, location, and time to maximize revenue.
For example, museums charge different fees for different age groups, and airlines charge higher for business class to capture the maximum price a customer is willing to pay.
Meanwhile, in psychological pricing, prices are set slightly below round figures or based on reference pricing, which compares the sale price to a higher "original" price. It makes products seem cheaper.
Last is Promotional Pricing, which involves temporary price offers like rebates, low-interest financing, and limited-time deals to create a sense of urgency and stimulate short-term sales.
6.12 Price Adjustment Strategies I
Price adjustment strategies refer to how companies modify their basic prices to account for customer differences and changing market conditions. These include:
- Discounts: Offering temporary reductions can incentivize purchases, reward customer loyalty, and clear out inventory—for example, seasonal or clearance sales by an apparel retailer.
- Trade-in allowances: These lower the purchase price for customers who trade in an old item, stimulating new sales. For example, Apple offers trade-in programs where customers can exchange their old devices for a discount on a new one. It helps manage the product lifecycle and fosters customer loyalty.
- Segmented Pricing: Companies can maximize profits by charging different prices to different customer segments, often based on willingness to pay or cost-to-serve differences, like airlines charging different amounts for economy and business class.
- Psychological Pricing: Prices like $0.99 instead of $1.00 can make a product seem cheaper, boosting sales. It leverages consumer perception to increase appeal.
- Promotional Pricing: Temporary price reductions or 'sales' can drive short-term demand spikes and bring in new customers, contributing to market penetration and sales growth. For example, a buy-one-get-one-free deal.