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Price Adjustment Strategies for Business

Usually, the company needs to adjust their pricing for various customer differences & customers changing situations. Here, we’ll discuss the seven various price adjustment strategies. Have a look –

  1. Discount & Allowance pricing
  2. Segmented pricing
  3. Psychological pricing
  4. Promotional pricing
  5. Geographical pricing
  6. Dynamic pricing
  7. International pricing

Discount & Allowance pricing:  Discount is a direct cut off price on purchases within a specific time period or a specific number of quantities. Discount may be-

  • Cash discount ( reduction of price to buyers who pay the bills instantly )
  • Quantity discount ( discount on purchasing a large number of products)
  • Functional discount ( its give trade channel  members  who  perform a certain function )
  • Seasonal discount ( price reduction for those who purchase product out of season )

Allowances are other types of reduction of price. It‘s two forms.

  • Trade-in allowances ( price reductions for old items when buying a new one)
  • Promotional allowances ( price reductions for participating in advertising & sales support programs)

Segmented pricing:  Segmented pricing defines selling a product at two or more prices based on differences in cost. It has several forms.

  • Customer segment pricing: Different customer pays the different price for the same product or service. In movie theaters & museums, students & senior citizens pay the low entry fee.  In public bus services, students always pay half for their seat & the general people have to pay the full price.
  • Product based pricing: Different types of product charges the different price based on their cost differences.  For example:  In air traveling, the economic seat is always lower than the business seat. Business class customers also get some extra benefits with a more comfortable seat, high-quality food & service.
  • Location-based pricing: Company charges the different price in different locations. In theaters, seat prices vary from their locations, distant seat charges lower but in front seat charges higher in Movie Theater. We can also see the opposite situation in cinema halls. Distant seat charges higher but in front seat charges lower.
  •  Time-based pricing: In the different season, price charges also different, the day, the night, daily, weekly, monthly even hourly. The seasonal product is less than the price in out of season like winter clothes.

Psychological pricing:  Psychological pricing is that pricing which is considered the psychology of price of customers. It is not economic pricing. This is mainly used to say something about the product. There’re many customers who judge product quality based on its price. At the time of buying any perfumed, low price product consider as low quality. Some customers believe high price indicated something in special.

 Promotional pricing:  Promotional pricing is a process in which producer temporarily pricing their product less than the list price & even less than the cost to increase their short-run sales. It has several forms.

  • Discount ( simply offers discounts from the list price)
  • Special event pricing ( seasonally reduce price )
  • Limited time offers ( online flash sales, buying urgency, make buyer feels  lucky)
  • Cash rebates ( directly cash discount within a specific  time period)

Geographical pricing: Geographical pricing is a process in which producer set their price for customers located in different parts of the world. A company must carefully set its pricing for customers who live in different parts of the world. Now, we‘re going to see five different geographical pricing strategies.

The ford sells their car all over the United States. The cost of freight is high that affect the companies & customers.  So, the ford wanted to establish a geographical pricing policy.

  • FOB –origin pricing: It is a geographical pricing strategy in which products are placed free on board.  Then the customer pays freight from the factory to the destination. For example, the ford places their car to their showroom. The customer often comes & chooses their desirable one. Then the customer pays the freight from the factory to the destination.
  •  Uniform –delivered pricing:  It is a geographical pricing strategy in which the company charges the same price for all customers regardless of their location. The charges freight cost is the average cost for all customers. For example, the ford places their car to their respective point & charges the same price for all customers regardless of their location.
  •  Zone pricing:  It is a geographical pricing strategy in which the company set up two or more zones for customers. All the customers within the zone pay the same freight cost for any product.  If any customer‘s destination more distant from the zone then the higher price has to pay for him\her.
  • Basing-point pricing:  It is a geographical pricing strategy in which the seller set some city as the main point or basing point. From this point, they charge all customers on the same freight cost from that city to the customer’s destination.
  •  Freight-absorption pricing:  It is a geographical pricing strategy in which the seller absorbs all or some part of the freight charges so that seller can get the desired business. Sometimes, the seller might anxious about to do business with a customer or a particular area. That’s why seller pays all the cost or part of cost freight to get the desired business. If the seller can get the more business the average costs will decrease more than compensate for its extra freight cost. This pricing helps to penetrate into the market & hold on competitive markets.

Dynamic pricing: Dynamic pricing is a process in which producer adjust their pricing to meet the characteristics & needs of individual customers & situations. History says that most of the price is set by the negotiation between buyers & sellers. There‘re fixed pricing policies in which setting one price for all types of customers. Today most business organization follows these ideas. But there also exist some companies who are using dynamic pricing.

 International pricing:     Some company produces their product to sell in the international market.  They also decide what prices to charge in different countries. For that companies set a uniform worldwide price.

For example, Ford sells its car at the same price everywhere, no matter the buyers situation in the US, Europe, or a third world country.  This company only adjusts their price in the local market conditions & cost considerations.

Charging more in different countries may have many factors like economic conditions, competitive situations, laws & regulations, natural conditions, customer’s perceptions & preferences also effect for pricing. Some company has the different marketing plan for different countries, this also affects the pricing strategy.

Obviously, the cost is an important factor for the international market. We may face a higher price abroad than ours. McDonald’s charge $3.79 for big Mac in us & 46.80 in Switzerland or $5.00 in Russian. Oral –B toothbrush sells it at home $2 but $10 in China.

Price is the key element to enter into the international market easily. The company must consider the price for poor, middle-class consumers.

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