Pricing strategy

a.    Cost-based pricing:

Cost-plus pricing: Adding a standard markup to the cost of the product.

Break-even pricing: Setting price to break even on the costs of making and marketing a product; or setting price to make target profit.

Value-based pricing: Setting price based on buyers perceptions of value rather than on the sellers cost.

Value pricing: Offering just the right combination of quality and good service at a fair price.

Competition-based pricing: Setting prices based on the prices that competitors charge for similar products.

b.    New-product pricing:

Market-skimming pricing: Setting a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay the high price; the company makes fewer but more profitable sales.

Market-penetration pricing: Setting a low price for a new product in order to attract a large number of buyers and a large market share.

c.     Product Mix pricing:

Product line pricing: Setting the price steps between various products in a product line based on cost differences between the products, customers evaluations of different features and competitors prices.

Optional-product pricing: The pricing of optional or accessory products along with a main product.

Captive-product pricing: Setting a price for products that must be used along with a main product, such as blades for a razor and film for a camera.

By-product pricing: Setting a price for by-products in order to make the main products price more competitive.

Product bundle pricing: Combining several products and offering the bundle at a reduced price.

d.    Price-adjustment Strategies:

Discount and allowance pricing:

Cash discount: A price reduction to buyers who pay their bills promptly.

Quantity discount: A price reduction to buyers who buy large volumes.

Functional discount: A price reduction offered by the seller to trade channel members who perform certain functions such as selling, storing and record keeping.

Seasonal discount: A price reduction to buyers who purchase merchandise or services out of season.

Allowance: Promotional money paid by manufacturers to retailers in return for an agreement to feature the manufacturer's products in some way.

Segmented pricing: Selling a product or service at two or more prices, where the difference in prices is not based on differences in costs.

Psychological Pricing: A pricing approach that considers the psychology of prices and not simply the economics, the pricing is used to say something about the product.

Reference prices: Prices that buyer carry in their minds and refer to when they look at a given product.

Promotional pricing: Temporarily pricing products below the list price and sometimes even below cost, to increase short-run sales.

e.    Geographical pricing:

FOB- origin pricing: A geographical pricing strategy in which goods are placed free on board a carrier; the customer pays the freight from the factory to the destination.

Uniform-delivered pricing: A geographical pricing strategy in which the company charges the same price plus freight to all customers, regardless of their location.

Zone pricing: A geographical pricing strategy in which the company sets up two or more zones. All customers within a zone pay the same total price; the more distant the zone, the higher the price.

Basing-point pricing: A geographical pricing strategy in which the seller designates some city as a basing point and charges all customers the freight cost from that city to the customer location, regardless of the city from which the goods are actually shipped.

Freight-absorption pricing: A geographical pricing strategy in which the seller absorbs all or part of the actual freight charges in order to get the desired business.