Pricing strategies and their types
Currently, there are various pricestrategy. The choice and development of a specific pricing policy has a huge impact on the future activities of any enterprise. After all, the calculation of the price for the sale of products depends on the amount of profit received, given the amount of costs for its production.
In the most general form, the following pricing strategies can be distinguished:
- High prices.
- Average prices.
- Low prices.
The first type is designed for a rather narrowconsumer audience, since not all citizens are ready to part with a large sum of money in order to purchase a new product. However, such manufacturers, as a rule, guarantee high quality of the product. Thus, the level of price is justified by a high-quality raw materials base. This strategy proves to be most effective if there is no serious competition in the selected market segment. On the one hand, an entrepreneur runs the risk of producing a unique product designed for well-off consumers. On the other hand, he gets the opportunity to independently determine the price, that is, acquires monopoly power in this area.
Of course, this state of affairs will not becontinue indefinitely, because sooner or later competitors will appear, then you will have to consider other types of price strategies. Until then, the main task of the manufacturer is to receive, as much as possible, profits.
The average price strategy is used for the most partenterprises and organizations, as it is suitable for all stages of the production process. It is based on maximizing income, but is designed for a long-term perspective. That is, the entrepreneur should not expect a momentary effect, as sales will grow gradually. Such price strategies are popular because of the reduced risk of unclaimed goods because of its high price. In this case, you can expect an average profit level of 8-10% of the charter capital.
If an entrepreneur is oriented towards lowprices, then he adheres to the strategy of price breakthrough. As you know, reducing the cost of goods guarantees an increase in demand for it. Many enterprises on the verge of bankruptcy, thanks to low prices, expand the audience of consumers, which contributes to the increase in profits.
In addition, depending on the industryfunctioning, from the market segment, the economic situation and other factors can be identified and other marketing strategies. Kinds of them are guided by existing problems and the basic purposes which it is necessary to reach. For example, the method of differentiating prices by various factors is very popular all over the world. Producers periodically raise their sales level through seasonal discounts or through special promotions that offer the consumer group to buy goods at a larger volume at a lower price.
The government actively supports such pricestrategy, as the introduction of preferential and stable prices. Quite often the preferential price reaches a level much lower than the cost price, which allows a sharp increase in sales in the shortest possible time. State bodies also regulate pricing in the production of essential goods. Such enterprises adhere to a policy of stable prices, counting on a regular income in the long term.