Pricing and Non Pricing Strategies Explained

A well thought out price strategy is one of the most important things an ecommerce retailer can have as it’s critical in assessing the competitiveness of a product and consumer demand and should continually be evaluated. The definition of pricing strategies is best explained through example. Check out some common types of price strategies that companies use so then can price their products.

Pricing Strategies

Cost-plus pricing

This refers to adding a fixed percentage to the cost-price of your products to set your prices at this rate.

Competition-based pricing

This type of pricing means that you set the price of a product based on what your competitors are charging for similar products.

Loss leader

This refers to selling a product at a low price (at the cost price or even lower) to encourage sales of other products.

Absorption pricing

Absorption pricing is a form of cost plus pricing where the total price ensures that all costs are covered – so this would mean recouping the variable cost of the item as well as a proportionate amount of the fixed costs too.

High-low pricing

High-low pricing happens when products are regularly priced higher than competitors, but through promotional activity such as adverts and vouchers, lower prices are offered on key items. The lower promotional prices are targeted to entice customers and the customer is offered the promotional product as well as the regular higher priced products.

Non pricing strategies

Non-pricing strategies occur when a company decides to distinguish its products from their competitor’s products, not by price but on the basis of other attributes such as design and materials or by its quality of service or speed of delivery. This takes all consideration of price out of the equation and concentrates on how the product is marketed and advertised to potential customers to convey the differentiators.

Posted on the 25th April 2011 by Mike Tags:

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