Price Strategy

Before introducing a product to the market, you should determine the medium-term pricing strategy. A fundamental distinction must be made between high-price strategies and low-price strategies.

Ask yourself the following questions:

  • According to which pricing strategy do I want to offer my product and why?
  • What short-term pricing strategies (discounts, rebates, etc.) are applied?
  • Have opening offers been taken into account?

High-price strategy

There are essentially two high-price strategies:

Premium strategy
With the premium strategy, customers usually pay for a certain additional benefit and a certain image. This is supported by appropriate advertising measures. Typical examples of the premium strategy are high-quality branded products or luxury products such as watches, perfumes and cars. Premium products impart extravagance to their buyers and signal prosperity. Customers like to pay a little more for it.

Skimming strategy
Skimming also relies from the outset on a high introductory price, which is subsequently reduced step by step. This strategy is particularly suitable for products with a "snob" or fashion effect (e.g. computers, video, telecommunications and audio equipment). Sales volumes are generally low, unit prices relatively high. With increasing market development or increasing competitive pressure, the price is lowered in order to win the next layer of new customers. In this way, the largest possible turnover is skimmed off in each market segment. The advantages: The high introductory prices allow a quick amortisation of the research and development costs. But there are also risks: Due to the high prices, it may not be possible to sell enough and the required market volume may not be achieved.

Low-price strategy

There are also two main low-price strategies:

Promotion price strategy
With the promotion price strategy, you keep the product price below the price of comparable products. This image of a low-price business attracts price-conscious purchasers (e.g. to food discounters such as Aldi or Lidl). With this strategy, low prices are also maintained in the longer term.

Psychological pricing strategy

In addition, there are some psychological methods that can help you position your product successfully against the competition.

Strategy of “round” prices
Here prices are set just below a “round” sum, in order to create the impression of a particularly keenly priced product (e.g. € 19.90 instead of € 20.00). These are also called signal prices.

Temporal price differentiation
Happy Hour, season prices, early bird discount: In order to ensure that production capacity is utilised as evenly as possible and to reduce fluctuations in activity levels, products are offered at different prices at different times. Examples: Day and night rates for telephone calls, cheaper hotel rooms out of season.

Personal price differentiation
Special prices for students, senior citizens, children or employees: Personal price differentiation gives customers a feeling of exclusivity.

Price differentiation according to groups of buyers
Simple version or luxury version: In this case, pricing is based on the income of the target group.

Spatial price differentiation
Prices may vary depending on the location. This also includes, for example, distance-related charges for delivery services or surcharges at certain tables where the guest is served more quickly.

Quantitative price differentiation
Offers such as “Buy 2, get 3” or the frequently used bonus cards increase sales.

Individual prices
This strategy is also called “perfect price differentiation”. Example: Individual offers for catering for a wedding. This also includes price-fixing mechanisms in which customers express their willingness to pay (e.g. auctions).

Price differentiation according to distribution channels
Internet, telephone, mail: The lower the effort, the lower the price. For example, prices for overnight stays in hotels may vary according to the amount of booking required.

Loyalty-dependent price differentiation
Subscription customers in the theatre, regular guests in the restaurant, long-term club memberships: The product becomes cheaper the longer the customer relationship lasts.

Price bundling
In this case, different products are offered for a total price that is more favourable than the individual purchase of these products. Example: Combo meal menus in fast food restaurants.

Discounts
Discounts are used more often than “real” price reductions. Discounts can be limited in time. Examples include volume discounts, loyalty discounts, early-payment discounts, bonuses and performance discounts.

Sample text: Pricing strategy
Our product is offered at a rather high price, in line with the philosophy that high quality justifies a high price. The high-price strategy suits our target group. We offer our customer an additional benefit through our range of premium services: All services are offered from a single source. Discounts are offered if several services are used. Opening offers are planned and calculated in the form of vouchers.