Pricing strategy can be defined as the strategy that aimed on finds the product best selling price to accomplish overall organizational objectives (Kurtz, 2012). Pricing strategic is directly related to product positioning. It is because the managers must consider how much the target market is willing to pay and cover back of the product cost. Therefore, Chatime has decided to lower its prices on milk tea to target on common people.
First of all, penetration pricing is the major determinant of the price and that is employed when the product managers have to give most of the value to the customers and keeps a small margin. Chatime decided use penetration pricing where set a lower price of milk tea than the eventual market price to attract
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Therefore, Chatime using psychological pricing strategy which is set those ending with nines or other odd numbers on all beverages to stimulate consumer demand and sometimes these are referred to as “just below” prices as they are often “just below” an even price such as RM1.99 vs RM2.00. For example, Chatime instead of charge RM6 for a milk tea beverage you might charge RM5.99 per beverage. Some consumers associate the price closer to RM5 than RM6 even though it is only one cent less and they may subconsciously be partially ignored. The theory that drives this is that lower pricing such as this institutes greater demand than if consumers were perfectly rational. Psychological pricing is one cause of price points to get more customers and the psychological pricing method helps Chatime build an impression of the brand without making significant changes to the product. Simply revising the pricing structure can make the product seem like the best on the market compare with other competitors or elevate the Chatime’s milk tea to the top of the available options. Although the price of Chatime’s milk tea is lower than competitors, customers are those who important of quality and price attributes will buy the products too. It is because customers are relatively insensitive to the product price. Customers willing to pay more for own
The company must factor in that each of their customers has lifetime value, a greater value than a small gain made on first sales. With competition in their sector, more penetration pricing would be appropriate. The penetrating pricing strategy would only make sense to retain customers; the pricing strategy must realize lifetime value, (University of Phoenix, 2011).
The pricing strategy that I chose is marketing objectives. Our company will deliver on this strategy to this stand by competing with our competitor’s stand. Our competitor, Jimmy, manages the Lemonade Stand “Liquid Yellow” charges $1.50 for one cup of lemonade. However, they use artificial ingredients, such as artificial flavoring and coloring, white sugar, etc. My company decided that we want to have a price that is higher than Jim’s price. We decided that we want to charge $2.00 for a cup of lemonade. We decided to charge this price because unlike Jim’s stand, we use all natural ingredients, which cost more than artificial ingredients and are healthier for you than artificial ingredients are. That is my company’s pricing strategy.
Companies can choose many ways to set prices, skimming price strategy where a company sets a higher price than normal and a penetrating price where low initial price is set. “Pricing
“Market penetration” is a relatively straightforward strategy, involving more sales of an existing product in an existing market. Existing customers need to be encouraged to buy more of the product or attract new customers. Businesses usually use different and effective promotional techniques or drop the prices to achieve this goal.
This strategy guarantees that the company does not loose out on the venture by covering their fundamental costs of operation. This allows them to keep the price low enough to entice consumers while simultaneously hedging themselves from the risk of losing money on each item sold. This is basis for a market penetration strategy.
The second pricing strategy is the penetration pricing where the product enters newly into the market. To gain some consumer base from the competitors, the seller initially charges a lower price than the competitors. For example the ticket prices initially charged for IPL, Indian Premier League, matches were lower than the ticket price of the competition ICL matches. On the contrary, price skimming strategy is to grab the financially top class of the market and to do this, the seller charges high prices. The effectiveness of this strategy is based upon
The pricing strategy that will best work for our marketing plan is psychological pricing. This pricing technique is a strategy based on the theory that certain prices have a psychological impact (Psychological pricing, 2016).
The definition of Premium pricing strategy is, using a high price where there is uniqueness about the product or service. This approach is used where a substantial competitive advantage exists. Such high prices are charge for luxuries, free delivery-pick- up service, service quality, special chemical free products and prestigious presentation.
Based on these 6 factors in setting a price: selecting the pricing objective, determining demand, estimating costs, analyzing competitors costs, prices and offers, selecting a pricing method and selecting the final price, Singapore GP Pte Ltd employed 2 different pricing strategies. They are
Loss leaders is to do with the product that is sold for a low volume price, with it attract sales towards customers. Psychological pricing is away to encourage sales. By pricing products strategically e.g. rounding the price number up increase sales without customers overspending.
c) High price strategy. ICEDOT may choose to price the products and services it offers, more than the rest of the competitors in the industry. Concerning the information from the course reading, this will be a definite move to create a perceived value. Consumers in most cases, relate high priced products and services to quality, and believe high priced products are more worth than the low priced commodities.
Introduction Pricing is an important strategic issue because it is related to product positioning. There are many ways to price a product, eg. price skimming, penetration pricing, etc. Price skimming is a pricing strategy in which a marketer sets a relatively high price for a product or service at first, and then lowers the price over time where a new, innovative, or much-improved product is launched onto a market. The objective with skimming is to “skim” off customers who are willing to pay more to have the product sooner; prices are lowered later when demand from the “early adopters” falls. The success of a price-skimming strategy is largely dependent on the inelasticity of demand for the product either by the market as a whole, or by
Price interacts with all other elements of the marketing mix to determine the effectiveness of each and of the whole. The objectives that guide pricing strategy should be a subset of the objectives that guide overall marketing strategy. Thus, it is probably wrong to view price as an independent element of marketing strategy or to assert that price, by itself, is a central element in the marketing mix.” (Webster, 1979)
The company would employ varied marketing strategies that they will use for the next one and three years. One of them is the pricing strategy, which is one of the essential marketing elements. Bearden, Netemeyer and Haws, (2011, p.63) point out that pricing strategy is one of the vital element of competing with competitors favorably. This is through setting the prices of products differently in order to differentiate the price from that of the competitors. Many companies use pricing strategy in setting the price above or below the equilibrium level in the market. For instance, the
Price, which is one of the most important elements of the marketing mix, can be difficult to get right. Pricing too high, or low, can negatively impact on customer satisfaction and revenue. Adopting a pricing strategy is necessary to achieve desired sales objectives (Chan & Wong 2005).