Your Retail Price is the dollar price you direct distributors to sell your products to customers. Retail Price is usually a key determinant of Consumer Demand and is critical to maximizing your Sales Revenue and Profit.
The most common pricing strategies are as follows:
Economic Value Pricing
Economic Value Pricing focuses on the cost–benefit determination by Customer of purchasing and using the Product over a period of time.
An example would be purchasing an electronic vehicle, where the purchase price may be higher but the ongoing operating and maintenance costs may be substantially lower.
Customer Value Pricing
Customer Value Pricing focuses on the perceived benefits a customer believes they will receive from purchasing a Product against not purchasing.
An example would be the purchase of a new luxury car versus saving the difference.
Market-Based Pricing
Market-Based Pricing prices a Product at the price the market will bear.
This can be seen with monopolies, duopolies, and oligopolies where there are few sellers and many buyers.
Examples would be Banks, Oil and Pharmaceutical Companies.
Cost Plus & Target Pricing
Cost Plus and Target Pricing are related and based on an organization seeking a predetermined return (gross profit margin).
Target Price generally based on industry research and an organization knowing its cost of producing and selling a product (i.e. “Target Cost”) and then adding a desired gross margin.
Cost Plus and Target Pricing widely used in automotive and electronic industries in Japan.
Price Skimming Pricing
Price Skimming Pricing involves inflating prices to increase gross margins and profit.
Usually imposed during Launch and Growth Phases of a New Product in the product life-cycle where competition is limited
Price leader organizations generally have a product or technological edge (e.g. new patent, idea) and pursue Price Skimming until competitors catch up.
Penetration Pricing
Penetration Pricing involves setting artificially low prices to gain a foothold in a Market to create demand and a based for a New Product or to sell a related Product
Examples are large department stores like Walmart who advertise a sale item at a loss price knowing that once customers come into the store they will buy more.
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