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In premium pricing, the firm sets costs which are higher than the competitors and is based on value branding. This model is applied especially when the product is new in the market associated with selling of unique products. A business can use premium pricing by first creating value perception of the product to the customers. The method and appearance of packaging should attract the customer as well as stock interior decoration to support the premium prices (Steenhuis, Waterlander & De Mul, 2011).
Pricing for Market Penetration
The penetration technique is pricing with an aim to attract new buyers by lowering of prices on goods and services. Companies use this model to swiftly operate with less struggle in competition field. The penetration strategies can be applied by an upcoming business where it offers prices to their products slightly lower than their competitors. Over a time, due to the increase in awareness of the product, profits can be achieved due to demand. in the long run, after getting into the market, the entity may choose to increase the prices based on their cost of inputs.
Economy Pricing
Economy pricing is a model of product pricing used by a wide range of businesses with the aim of minimizing the production as well as marketing costs thus attracting price-conscious customers. Economy pricing can be applied by discount retailers or food suppliers who have a sales volume by giving discounts on products or maintain low prices to encourage more customers.
Price Skimming
Price skimming enables firms to maximize sales on new products in the market. This is achieved by setting high prices on the product in its early phase in the market then lowering the prices gradually as competition sets in the market. Skimming prices can be applied by starting companies which generates development costs and also increases an impression of quality to the consumers (Martínez-de-Albéniz & Talluri, 2011).
3.Ways on fighting price wars can be categorized into non-price responses and price responses.
Non-price responses
Revealing strategic purposes and abilities: Strategies to be initiated are such as offering to match the competitor's price or low prices on products as well as showing the cost advantage (Sotgiu & Gielens, 2015).
Quality branding: A company can achieve this by increasing differentiation in products appearance. Adding features to a product which can attract customers purchase as well as create awareness of the existing features along with their benefits. The company should also emphasize the performance perils in low priced selections.
Cooperating with contributors: A company experiencing war on prices should form a strategic partnership by offering commercial and exclusive deals with various retailers, suppliers, brokers or other active providers of related services.
Price responses
With price responses, the firm is required to use intricate price actions. This can be achieved by offering discounts, promotions of prices, by use of two-part pricing and loyalty programs for the goods. A company can also introduce new products which can be achieved by introducing neighboring varieties that strives in customers sector being defined by competitors. A company should also initiate simple price actions such as adjusting the prices to correspond to that of competitors or a new company in the market (Van Heerde, Gijsbrechts & Pauwels, 2015).
Blank, S. (2013). The four steps to the epiphany: successful strategies for products that win. BookBaby.
Hamzaoui Essoussi, L., & Linton, J. D. (2010). New or recycled products: how much are consumers willing to pay?. Journal of Consumer Marketing, 27(5), 458-468.
Martínez-de-Albéniz, V., & Talluri, K. (2011). Dynamic price competition with fixed capacities. Management Science, 57(6), 1078-1093.
Sotgiu, F., & Gielens, K. (2015). Suppliers Caught in Supermarket Price Wars: Victims or Victors? Insights from a Dutch Price War. Journal of Marketing Research, 52(6), 784-800.
Steenhuis, I. H., Waterlander, W. E., & De Mul, A. (2011). Consumer food choices: the role of price and pricing strategies. Public health nutrition, 14(12), 2220-2226.
Steenkamp, J. B. E., Van Heerde, H. J., & Geyskens, I. (2010). What makes consumers willing to pay a price premium for national brands over private labels?. Journal of Marketing Research, 47(6), 1011-1024.
Van Heerde, H. J., Gijsbrechts, E., & Pauwels, K. (2015). Fanning the flames? How media coverage of a price war affects retailers, consumers, and investors. Journal of Marketing Research, 52(5), 674-693.
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