Business

1. Discuss five Pricing Methods and identify for each in what kind of products they are most logically to be used.

The five pricing methods i selected and identified follows:

a. Penetration pricing - aims to increase market share of a product, providing the opportunity to increase price once this objective has been achieved. Penetration pricing is the pricing technique of setting a relatively low initial entry price, usually lower than the intended established price, to attract new customers. The strategy aims to encourage customers to switch to the new product because of the lower price. Small oil players in the Philippines such as TOTAL, Flying V and Eastern Petroleum imposed this strategy with a marketing objective of increasing market share or sales volume. In the short term, penetration pricing is likely to result in lower profits than would be the case if price were set higher. However, there are some significant benefits to long-term profitability of having a higher market share, so the pricing strategy can often be justified.

Penetration pricing is often used to support the launch of a new product, such as when SUN cellular entered the telecommunications industry and it works best when a product enters a market with relatively little product differentiation especially on urban areas where SUN cellular receptions are not distorted and where demand is price elastic so a lower price than rival products is a competitive weapon.

b. Psychological pricing - uses the customer's emotional response to encourage sales. This kind of pricing is different from reducing prices. A doctrine in Marketing states that “company may increase sales without significantly reducing prices”. By considering some several factors in psychological pricing strategy a company may acquire satisfactory results as based on customer's perception of the products' prices. Instead of appealing to the rational side of the consumer, this strategy appeals to their emotional side. The...