Demand based pricing, Marketing Management

Demand Based Pricing: Described methods belong to the category of demand / market based pricing:-

1. What the Traffic can Bear' Pricing

2. Skimming Pricing

3. Penetration Pricing

  • What the Traffic can Bear' Pricing: The seller takes the maximum price that the customers are eager to pay for the product under the given circumstances. This technique is used more by retail traders and than by manufacturing firms. This method brings big profits in the short term objective. But in the long run it is not a safe concept; chances of errors in judgment are very high.
  • Skimming Pricing:This method aims at high profits & high price in the early stage of marketing the product. It gainfully taps the opportunity for selling at high prices to those segments of the market, which do not bother much regarding the price. This particular method is very useful in the pricing of new products, especially those that have a luxury or specialty elements.
  • Penetration Pricing: Penetration pricing seeks to gain greater market penetration throughout relatively low price. This method is also helpful in pricing of new products under definite circumstances. For instance :when the new product is capable of bringing in large volume of sales, but it is not a luxury item and there is no affluent / price insensitive segment, the firm can select the penetration pricing and make large size sales at a reasonable price before competitors enter the market having a similar product. Penetration pricing in such type of cases will help the firm have a good coverage of the market and keep competition out for some time.

The price elasticity of demand is taken into account in all of the demand based pricing methods, indirectly or directly. Price elasticity of demand refers to the relative sensitivity of demand for a product to changes in its value in other words how significantly the sales of the product are affected when price is changed. If decrease or increase in the price of the product results in significant increase or decrease the product is said to be price elastic conversely, if price change does not considerably affect the sales volume, a product is called to be price inelastic.

Posted Date: 10/15/2012 4:31:23 AM | Location : United States







Related Discussions:- Demand based pricing, Assignment Help, Ask Question on Demand based pricing, Get Answer, Expert's Help, Demand based pricing Discussions

Write discussion on Demand based pricing
Your posts are moderated
Related Questions
Define Need in marketing in briefly. Need is a state of felt deprivation. This includes fundamental physical needs for clothing, food, warmth and also safety; as social needs f

Question 1: Explain how effective management of expatriates is increasingly been recognised as a major determinant of success or failure for international businesses. Quest

Question 1 (a) Define Business Ethics. (b) Critically explain how Business Ethical considerations will help in the Marketing Communication of a product or service. Suppor

Task of management team responsible for marketing communications Main task facing the management team responsible for marketing communications is to decide following: 1.  w

Question 1: Describe the evolution of malls and specialty stores Detail explanation on ‘Evolution of Malls'. Detail explanation on ‘Speciality Stores and Malls'

Figi Fabricating Company is reviewing the economic feasibility of manufacturing a part that it currently purchases from a supplier.  Forecasted annual demand for the part is 3200 u

The PEST analysis is a structure that strategy advisors utilize to examine the external macro-environment in which a firm works. PEST is an acronym for the subsequent factors

i)  The monthly (or whatever period the futures contract is specified in) listed price of each of the four contracts for a period of 12 months. ii) The monthly spot prices for e


DRIP elements of marketing communications DRIP element Examples Differentiate Burger King differentiates itself from market