Essay on Pricing Strategy
Price is simply the amount of money that consumers are willing to pay for a product or service (Armstrong and Kotler, 1993). In earlier times, the price was determined through a barter process between sellers and purchasers. In modern times, pricing methods and strategies have taken a number of forms.
This paper is aim to explain the different types of Pricing strategies, more specifically the market-penetration pricing strategy.Read also Major Pricing StrategiesPricing products, new products or existing products require the use of different strategies. For example, when pricing a new product, businesses can use either market-penetration pricing or a price-skimming strategy (Armstrong and Kotler, 2005) (Kotler, Brown, Adam, Burton & Armstrong, 2007). A market-penetration pricing strategy involves establishing a low product price to attract a large number of customers.
By contrast, a price-skimming strategy is used when a high price is established in order to recover the cost of a new product (Armstrong and Kotler, 2005) (Kotler, Brown, Adam, Burton & Armstrong, 2007). In addition, Pricing objectives are established as a subset of an organization’s overall objectives. As a component of the overall business objectives, pricing objectives usually take one of four forms: profitability, volume, meeting the competition, and prestige (Armstrong and Kotler, 2005) (Kotler, Brown, Adam, Burton ; Armstrong, 2007).Also, In addition to the four basic pricing strategies, there are five price-adjustment strategies: discount pricing and allowances, discriminatory pricing, geographical pricing, promotional pricing and psychological pricing (Armstrong and Kotler, 2005) (Kotler, Brown, Adam, Burton ; Armstrong, 2007). According to The Australian Financial Review’s article” Mitsubishi Cuts Prices” which has been published in the 28th of April 2006, Mitsubishi announced price reductions with the introduction of the Series II upgrade.The entry-model, now called the ES, was reduced from $34,490 to $27,990.
An SX model was introduced priced at $32,990, while the LS model was dropped. Prices on VRX, LX, and GT models were also reduced by amounts ranging from $1,500 to $3,000. Mitsubishi also announced that up to 1,500 retail customers who paid the old price would be eligible for a factory rebate of up to $2,000. This action has been taken by Mitsubishi in order to attract a large Number of Buyers.In other words, Mitsubishi has followed the “market-penetration pricing strategy” by setting a low price for a New Product which, according to (Kotler et al 2007), will results in a larger Market Share.
References list: •Kotler, P & Armstrong, G 2005, Principles of Marketing, Prentice Hall. •Kotler, P, and Armstrong, G 1993, Marketing: An Introduction, 3d ed. Englewood Cliffs, NJ: Prentice-Hall. •Kotler, P, Brown, L, Adam, L, Burton, S& Armstrong, G 2007, Marketing 7th Edition, Prentice Hall. •Peter, R 2006, Mitsubishi Cuts Prices, Australian Financial Review 28 April, viewed 28 April 2006.