Small businesses will play a vital role in the Indian economy. Worldwide, a good Pricing Strategy is key for any business to succeed. There are different strategies for pricing that retailers can adopt to profit in business, both in the long run as well as for short term goals.
- Premium pricing
It is for businesses that sell unique goods. In this strategy businesses sell at a higher price than its competitors. This strategy should be backed by the goods that have an impressive performance to create a favourable perception and customers are willing to pay a premium price.
- Penetration pricing
This technique is used to penetrate into the market. A business sells goods at a very low price to increase future demand and capture the market share. As the market share increases, prices are increased.
- Backward expansion pricing
This strategy is used by businesses who sell everyday use goods to common people. They keep the prices at an everyday low and attract customers from lower and middle classes. This strategy is used by large companies like Walmart and Target. This technique can be discouraging to small business who struggle to generate sufficient profit when prices are low.
- Creaming or skimming pricing
This strategy is designed for new products or product line launched in market. The product is launched at a very high price in the market. Businesses forego high sales to sell their product at a high price to gain a high profit. The prices are gradually lowered after the early adopters market is captured. It is most commonly seen for branded mobile phones.
- Psychology pricing
It plays with the psychology of consumer. If a product price is Rs. 99 then customer will go to Rs. 99 item than Rs. 100 item as it ‘seems less than 100’. This strategy is successful with businesses that can figure out the psychological pricing points of the customer.
- Bunch pricing:
In this strategy a business sells a low value item with a high value item. This boosts the sale of low value goods which are not otherwise fast moving items. They will lower the price of bundle and will sell along with slow moving items.