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Price Adjustment Strategies

Marketers adjust prices to account for customer differences and changing market conditions.

1. Discount and Allowance Pricing

  • Discounts: Direct price reductions offered for a specific reason.

    • Cash Discount: Given for prompt payments (e.g., 2% off for early B2B payments).
    • Quantity Discount: For bulk purchases.
    • Trade Discount: For wholesalers, retailers, and dealers.
    • Seasonal Discount: Given for off-season purchases.

  • Allowances: Promotional incentives provided by manufacturers to retailers.

    • Trade-in Allowance: Price reduction when exchanging an old product for a new one.
    • Promotional Allowance: Given to dealers for participating in advertising and promotional efforts.

2. Segmented Pricing

Selling the same product at different prices without cost differences.

  • Customer-Segment Pricing: Different prices for different customer groups.

    • E.g., Student discounts, senior citizen rates, defense personnel discounts.

  • Product-Form Pricing: Different versions of a product priced differently.

    • E.g., Economy vs. Business Class airline tickets.

  • Location-Based Pricing: Prices vary by location.

    • E.g., Out-of-state students pay higher tuition fees.

  • Time-Based Pricing: Prices change based on time factors.

    • E.g., Happy hours at restaurants, peak-season hotel rates.

Note: Prices should reflect real value differences to avoid customer dissatisfaction.

3. Psychological Pricing

Using pricing strategies that influence how customers perceive value.

  • Price as a Quality Signal: When customers can't judge quality, they rely on price.
  • Reference Prices: Prices customers expect based on past experience or comparisons.
  • Tactics Used by Sellers:
    • Sale Signs & Price Matching (e.g., "Best Price Guarantee")
    • Loss-Leader Pricing (Selling some items below cost to attract buyers).
    • Bata Pricing: Prices like ₹99.99 instead of ₹100 to seem cheaper.
    • Odd-Even Pricing:
      • Odd prices (₹499) suggest a bargain.
      • Even prices (₹1,50,000) suggest luxury.

4. Promotional Pricing

Temporarily reducing prices to boost short-term sales.

  • Common Methods:

    • Flash Sales & Limited-Time Offers: Creates urgency.
    • Special Event Pricing: Discounts during festivals or events.
    • Low-Interest Financing, Extended Warranties: Adds value without reducing list price.

  • Risks of Promotional Pricing:

    • Frequent discounts can damage brand perception.
    • Customers may wait for sales instead of buying at regular prices.

5. Geographical Pricing

Setting prices based on customer location.

  • FOB Origin Pricing: Customer pays shipping from factory.
  • Uniform-Delivered Pricing: Same price for all locations, including shipping.
  • Zone Pricing: Different prices based on regions or zones.
  • Basing-Point Pricing: Freight cost calculated from a specific city.
  • Freight-Absorption Pricing: Seller covers some or all shipping costs.

6. Dynamic Pricing

Continuously adjusting prices based on market demand.

  • Examples:

    • Uber surge pricing during peak hours.
    • Airline ticket pricing fluctuating based on demand.

  • Personalized Pricing: Adjusting prices based on individual customer behavior.

    • Example: Online stores offering special discounts based on past purchases.

Note: If used unfairly, dynamic pricing can hurt customer trust.

7. International Pricing

Companies set different prices in different countries based on:

  • Economic conditions
  • Competition
  • Legal and regulatory factors
  • Consumer preferences
  • Shipping & exchange rate fluctuations

Higher prices may result from higher operational costs, import duties, and logistical expenses.

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