Price Adjustment Decisions

Price Adjustment Strategies

In order to account for various consumer differences and shifting circumstances, businesses typically change their basic rates. The seven price adjustment tactics are segmented pricing, psychological pricing, promotional pricing, regional pricing, dynamic pricing, and international pricing. These are the seven price adjustment tactics that are examined.

Discount and Allowance Pricing

Most businesses alter their base prices to offer discounts to customers who pay their bills on time, buy in bulk, or consume at off-peak times. Discounts and allowances are the names for these pricing modifications. They can appear in several forms. One of the various reductions available is a cash discount, which results in a price reduction for customers who pay their bills on time. The phrase "3/15, net 30" is a common illustration, which signifies that even though payment is expected within 30 days, the buyer can deduct 3% if the invoice is received within 15 days. A price reduction for customers who purchase large quantities is known as a quantity discount. Members of the trade channel who undertake tasks like selling, warehousing, and record keeping are given a functional discount by the seller. A seasonal discount is a price cut offered to customers who purchase goods or services outside of the appropriate season. Another sort of discount off the list price is the allowance. For instance, trade-in allowances are discounts offered for returning an old product while purchasing a new one. The auto industry offers trade-in allowances the most frequently, although other durable items also offer them. Promotional allowances are payments or price cuts used to compensate dealers for taking part in marketing and sales assistance initiatives..

Segmented Pricing

Businesses typically modify their base prices to account for variations in consumers, products, and geographic areas. When a company uses segmented pricing, it may provide a good or service at two or more price points without justifying the variations in cost. Different structures for segmented pricing exist. Different customers pay various prices for the same good or service under customer segment pricing. For instance, senior persons and students may pay less to enter museums and theaters. When a product is priced differently based on its form, rather than its cost, it is referred to as product-form pricing. One liter (or around 34 ounces) of Evian mineral water, for instance, costs $1.59 at the neighborhood grocery store. However, beauty shops and spas charge a suggested retail price of $11.39 for a five-ounce aerosol can of Evian Mineral Water Spray. While the cost of providing each location is the same, a company uses location-based pricing to charge various prices for different places. For instance, state institutions have higher tuition rates for out-of-state students, and theaters have different seat costs depending on where the audience prefers to watch. Finally, by employing time-based pricing, businesses can alter their prices according to the time of year, the month, the day, and the hour. There are some prerequisites that must be met for segmented pricing to be one of the successful techniques. The market should be segmentable, and different demand levels should be seen across segments. The expenditures of market segmentation and outreach should not be more than the additional income generated through the pricing differential. Without a doubt, segregated pricing needs to be legal as well. Segmented prices must accurately represent the actual differences in how customers perceive value.

Psychological Pricing

The price reveals information about the goods and services. For instance, the majority of clients evaluate quality based on price. Even if a $100 bottle of perfume may only have $3 worth of aroma, some consumers are prepared to pay the $100 price tag because it offers something special. Sellers who use psychological pricing take into account price psychology as well as economics. For instance, customers frequently believe that things with higher prices are of superior quality. When consumers can assess a product's quality by hands-on use or visual inspection, they are less likely to consider pricing when doing so. Price will turn into a crucial quality signal, however, when they are unable to discern quality due to ignorance or incompetence.

Reference prices are another facet of psychological pricing; they are costs that customers keep in mind and use as a guide when considering a particular item. The reference price can be created by taking note of recent prices, remembering earlier prices, or analyzing the buying environment. When setting pricing, sellers could take into account or rely on certain customers' reference prices.

Promotional Pricing

In order to create a sense of urgency and excitement for purchasing, businesses would occasionally temporarily sell their products below list price, and in some cases even below cost. Different sorts of promotional pricing are possible. Simply offering discounts from regular prices might help a business boost sales and lower inventory. In particular seasons, sellers may also employ special event prices to entice additional buyers. To get holiday buyers into the stores, large-screen TVs and other consumer electronics are therefore discounted throughout November and December. Manufacturers occasionally make customers who purchase a product through dealers within a certain time frame an offer of cash rebates; the sellers pay the rebate directly to the customer. Rebates are frequently employed in consumer packaged goods as well as by manufacturers of small appliances, cell phones, and automobiles.

Geographical Pricing

A company must also choose how to price its goods for customers who live in various regions of the country or the world. Should the company risk losing the patronage of clients who are located further away by raising their prices to pay the higher transportation costs? Alternately, the business should charge all customers the same pricing, no matter where they are. Geographical pricing refers to determining a product or service's price based on the location of the country's and the world's clients.

Dynamic Pricing

Prices have largely been determined through bargaining between buyers and sellers throughout history. Fixed price policies, which set a single price for all customers, are a relatively new concept that emerged with the growth of big box retailing at the end of the nineteenth century. These days, this is how most pricing are set. However, some businesses are currently going against the set pricing trend. Dynamic pricing is being utilized. Dynamic pricing is the process of continuously adjusting prices to take into account the preferences and requirements of certain customers and circumstances. Consider how the Internet has impacted prices as one illustration. The Internet is bringing us back into a time of fluid pricing after a century of primarily fixed price patterns. Web retailers may instantaneously and continuously modify pricing for a wide range of commodities based on demand dynamics thanks to the flexibility of the Internet. Consumers can also influence prices by haggling on websites like Priceline or placing bids on auction sites like eBay.

International Pricing

Companies that sell their goods globally must determine the prices to charge in the numerous markets where they conduct business. In some circumstances, a company might decide to establish the same pricing everywhere. For instance, Boeing charges the same price for all of their airplanes, whether they are sold in the United States, Europe, or a third-world nation. However, the majority of businesses modify their prices to account for cost factors and local market conditions. The price that a business should charge in a given country or state relies on a number of variables, including the local economy, rules and regulations, the level of competition, and the state of the wholesale and retailing industries. Additionally, consumer views and preferences may differ from nation to nation, requiring a range of prices. Additionally, the corporation may have distinct marketing goals in various international regions, which call for adjustments to the price plan.

Reference

Kotler, P., & Armstrong, G. (2013).Principles of Marketing.Chennai: Pearson India Education Services Pvt Ltd

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