Lecture on Pricing Strategies

Lecture on Pricing Strategies

The Pricing Strategies of your small business can ultimately determine your fate. Small business owners can ensure profitability and longevity by paying close attention to their pricing strategy.Commonly, in business plans I’ve reviewed, the pricing strategy has been to be the lowest price provider in the market. This approach comes from taking a quick view of competitors and assuming you can win business by having the lowest price.

New-Product Pricing Strategies
  • Market-skimming pricing
  • Market-penetration pricing
New-Product Pricing Strategies:

Market-skimming pricing is a strategy with high initial prices to “skim” revenue layers from the market

  • Product quality and image must support the price
  • Buyers must want the product at the price
  • Costs of producing the product in small volume should not cancel the advantage of higher prices
  • Competitors should not be able to enter the market easily
New-Product Pricing Strategies

Pricing Strategies

Market-penetration pricing sets a low initial price in order to penetrate the market quickly and deeply to attract a large number of buyers quickly to gain market share

  • Price sensitive market
  • Inverse relationship of production and distribution cost to sales growth
  • Low prices must keep competition out of the market