Price strategies (types and definition)

The pricing strategies are all those guidelines that companies follow when setting the prices of their products or services.

It can be said that, for practical purposes, price strategies include the granting of resources related to marketing carried out by a certain company and belong to a group of practices included in their marketing plan by which these companies try to give an image to customers that can be remembered and maintained in the weather.

Pricing strategies The most common are those that are based on setting prices at different scales or levels between higher, lower or equal at market and competitive prices, based on the initial intention and the image to be provided.

Based on this criterion, the most frequent pricing strategies can be:

1.- Penetration

It consists of setting prices below the average market value, in order to create a special attraction and stimulate customers to choose the product over others. This is common in products on the market launch.

The low price strategy is a method to be handled with great care, since it admits significant risks.

It is used in one of the following cases:

• Launch of a new product and you want to achieve rapid penetration.
• In case the competition is very aggressive or strong and the product is in danger of disappearing from the market.
• As a tool to reassure and slow down the growth of competition.

In either case, the low price strategy allows you to quickly place yourself in the market, however, it should be studied since it can cause long-term problems, since the increase in business will make it necessary to gradually increase the price in order to maintain healthy finances, which can cause the consumer to feel cheated and consequently generate a bad image of the company and the product.

2.- Alignment or average price strategy

It consists of setting a price that corresponds to a price similar to that of the competition and within the value range that customers give to the product.

This strategy is recommended when the market has a huge number of competitors and consumers are very selective and demanding.

With this strategy, significant advantages are achieved, among which the possibility of being able to decrease or increase the price according to the behavior and mobility of the market stands out. Is pricing strategy it is a feasible way to preserve the conditions of healthy competition.

3.- Selection

It consists of the strategy of offering a product at a price higher than that existing in the market and to which consumers give it a much higher value. Exclusive or luxury items are often promoted through this type of marketing.

This strategy is recommended when the product being marketed offers tangible or intangible benefits or attributes that other competitors in this same category do not have.

For example: Adidas brand sports shoes and clothing, which offers consumers intangible benefits such as The maraca itself, which is a symbol of status and belonging, which allows an over-price compared to others in the competence. This same brand at the same time offers tangible benefits, such as technological advances in some high-performance sports models, materials that it uses, etc.

These strategies are within a basic scheme, which allows companies any number of possibilities to develop variants at the same time. time to establish their prices, without forgetting that the main purpose of these marketing mechanisms is the achievement of objectives for the benefit of their maximum cost effectiveness and possible utility.

Importance of having a pricing strategy

The price constitutes an elementary variable in the short term, unlike other important elements for marketing such as the product and the distribution, this fact of being more flexible, it facilitates the fact that the company can modify it in a timely manner to improve its profits, its profitability and initiate or respond to any war of prices.

This element contributes enormously to the positioning and in many occasions it is the only variable when conceiving an idea about the quality of a product and the competition.

What elements condition the setting of a pricing strategy?

Before setting a price, the company must take into account some factors that determine the sale price, the objectives to be achieved with that price. pricing policy and the Price strategy to follow.

• The company must implement its strategy, within certain margins:
• The bottom margin should be the minimum costs and profitability.
• The top margin should point to the capacity of the market demand.
• Look at the competitive advantages of the product, which allows the price to be slightly higher.
• Focus on the objectives that are a priority to set the strategies, between benefits, profitability, market share, the formation of an image.
• In addition to customers and competitors, there are certain parties that are affected and interested in the pricing of a product, such as suppliers, creditors, distributors and managers.
• The legal framework of each country, which enters into regulated price setting, cartels at high prices for monopoly, selling at a loss to eliminate competition, exchange rate, taxes, etc.
• Changes and technological advances in the market.