Price Adjustment Strategies

Price adjustment strategies refer to all those strategies which are applied by an organization to take into consideration the differences among the customers and rapidly changing environment.  The important price adjustment strategies are: geographical pricing, Psychological pricing, segmented pricing, promotional pricing, international pricing, discount and allowance pricing. The explanation of these strategies is given below.

 

  • Discount and Allowance Pricing

 

Various companies offer discounts and allowances on their basic price to reward the customers for their specific responses. Discounts can take many forms such as cash discount in which the buyer are given special discount if they pay before the due date of payment. Similarly quantity discount is given on the purchase of commodities in large quantities. For example price of one shirt is $5 but if buyer buys two shirts then the price is $4 per shirt. Other forms of discount are functional discount (in which is given to the channel members by seller for performing certain functions) and seasonal discount (in which discount is given to the buyers for purchasing goods out of season).

 

  • Segmented Pricing

 

Companies use segmented pricing to charge different prices from the buyers on the basis of differences in customers, products, and locations. Some of the important forms of segmented pricing are customer-segment pricing, product form pricing, location pricing etc. Under customer-segment pricing, companies charge different prices from different customers. For example students pay less for tickets of football match compared to other citizens. In case of product form pricing, customers are charged differently on the basis of different versions of the product. Here we can take the example of mobile phones which are priced differently on the basis of features but these features cost only a few more dollars to make. Similarly in case of location pricing, companies charge different prices from the customers on the basis of their preferences for certain locations. For example in cricket matches, the prices of tickets are different on the basis of location even though the cost of offering at each location is the same.

 

  • Psychological Pricing

 

Many people judge the quality of commodity by its price taking higher price as the sign of good quality. Sometimes customers do not have the information about the actual prices of products therefore they judge the quality of product by its price. Such type of behavior compels the sellers to increase the prices of their products despite the fact that the actual prices are low. Customers also carry prices in their minds; such prices are known as reference prices. In order to get higher profits, sellers have to influence the reference prices of the customers.

 

  • Promotional Pricing

 

Many organizations try to promote their products by lowering down the prices of their products below list price or even cost. Such promotional pricing helps the marketers to attract the more customers in short period of time. However promotional pricing can be dangerous for the organization because it can spoil the overall reputation of organization. Similarly such practices are easily copied by the competitors and do not help the organizations to build their brand in the long run. 

 

  • Geographical Pricing

 

Companies also charge different prices form the customers living in different parts of the country or world. If the customers are living in distant areas, companies have to charge higher prices to cover the cost of shipment but this will result in the losing of customers to competitors. Therefore it becomes difficult for the company whether to charge the uniform prices through out the country or charge prices according to the geographical conditions in which the customers live.

 

  • International pricing

 

Many organizations operate in various countries of the world, due to which they have to decide whether to charge uniform prices or sell products according to the situations of the countries in which the organizations operate. There are various factors which affect the price decision of the companies such as consumer perception, economic conditions, law and order situation, marketing objectives of the company etc. These factors help the organizations whether to charge similar or different prices through out the world. For example in many cases organizations charge higher prices from the people living in remote countries because of differences in their per capita income.

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