13 Promotional Pricing Strategy Advantages and Disadvantages

Why Use Promotional Pricing?

The bids are later reviewed all at once, and the most desirable one is chosen. Sealed bids can occur on either the supplier or the buyer side. Via sealed bids, oil companies bid on tracts of land for potential drilling purposes, and the highest bidder is awarded the right to drill on the land. Similarly, consumers sometimes bid on lots to build houses.

Why Use Promotional Pricing?

As we have seen above, the pricing in the case of services is quite complex, and naturally it is dependent upon the overall marketing strategy. A number of software training institutes such as NUT, Aptech, Bos­ton Software, etc. offer a two or three-year student programme. Once the students have enrolled, they are very likely to complete the pro­gramme due to parental pressure.

Introduction to Pricing Strategies to Increase Sales

Second is the loyalty card.Companies use it to manage discounts and promote gifts. You can almost find price discounts for various daily necessities. As always, with any strategic decision, the disadvantages of a given strategy or tactic must be considered. Whether the additional revenue is helping to pay the bills or boosting the profits on an already impressive year, revenue & profits are the lifeblood of any successful business. U.S. News & World Report offers a shopper’s guide on the best months to find the best deals. Ignoring competitors may leave you vulnerable to surprises in the market.

The change in the volume demand brought about by change in the prices is called the price elasticity of demand. Often price is the first factor a customer notices about a product. While the customer may base his final buying decision on the overall benefits offered by the product, he is likely to compare the price with the perceived value of the product to evaluate it. After learning about the price, the customers try to learn more about the product qualities. Bringing about changes in advertisements or promotional activities is also a time consuming task. But price is very flexible and can be changed according to the needs of the situation. Therefore it is a very important component of marketing mix.

It Promotes Revenue Growth

It launched a series of identity-driven promotions to students, teachers, the military, and employees at a number of Fortune 500 companies. Yet the popularity of promotional pricing actually devalues a brand when it’s overused. Most marketers use mass discounting tactics—they offer the same promotions to everyone, creating even more noise in a crowded, competitive marketplace. Promotional pricing is often used to drive more revenue into a business and to improve cash flow in the short term.

Why Use Promotional Pricing?

The price of the monthly offer is equivalent to about eight to ten return journeys between points of origin and destination. Similar tariff is offered on long-distance trains up to a distance of about 200 kilometres.

Tips to Increase Business Productivity

The customers feel they are more intimately involved in the action. Consequently, the organizers try to make use of this demand factor to secure hefty premium. Thus, the front row seats for a Lata Mangeshkar concert could be as high as Rs. 5,000 while tickets for the back rows could be as low as Rs. 100 per person. In the process, the volume of air travel went up enor­mously and the customers benefited with lower fares. The utility of services incurring the same costs may not be the same for the customer. For example, changing of the zipper of a trouser and changing of the zipper on a cloth handbag may involve the same amount of effort on the part of the mender.

When the brand launched its first nurses program, it brought 8,000 new nurses into its travel club and reduced fraud by 36%. Brands will slash their prices to unload excess inventory, acquire customers, or lift profits. Rewards are offered for being a part of the scheme and the more the customer spends the more points they accumulate, which leads to greater rewards.

Increased Value Perception

A number of software packages, including Microsoft Office and Microsoft Windows XP, etc., offer different prices in different segments of the market. The recent ‘Dhirubhai Ambani Pioneer Offer’ made by Reliance Infocom is a similar bundled offer. In economics, the demand curve shows the relationship between the price and the quantity demanded.

  • For simple reasons such as the geographic location the companies do vary or change the price of the product.
  • Of the latter, there is a percentage which does not indulge owing to the price.
  • Price determination methods are common with very little variations in them.
  • That makes it more tempting to go through with the purchase.
  • It is a commonly used pricing method amongst the varioustypes of pricing is designed to capture market share by entering the market with a low price as compared to the competition.

Pricing decisions made hastily without sufficient research, analysis, and strategic evaluation can lead to the marketing organization losing revenue. Prices set too low may mean the company is missing out on additional profits that could be https://quickbooks-payroll.org/ earned if the target market is willing to spend more to acquire the product. For marketers price is the most adjustable of all marketing decisions. In this type of pricing, the basic or fundamental services are priced at quite a low level.

What is Promotional Pricing?

In the case of a cell phone, a customer might pay a charge for one service such as a thousand minutes, and then pay a separate charge for each minute over one thousand. Get out your cell phone and look at how many minutes you have used. Many people are shocked at how many minutes they have used or the number of messages they have sent in the last month. Stores use private codes to target a specific group of people. Commonly provided to loyal customers for special shopping opportunities, such as first-time shoppers, private codes are a good way to bring in new customers.

  • That is, the price initially set is the price the seller expects to charge throughout the product’s life cycle.
  • You’ll be able to offset some of your costs because consumers will be paying something to gain access to what you offer.
  • Higher value due to higher perceived benefit, which may accrue due to high quality of the service or other value perceptions.
  • It also leads their customers to expect lower prices consistently.

While other strategies may cost a fortune, this one is relatively cheaper, and is also tried and tested in the market. Thus, promotional pricing helps to bring customers into the arena of buyers. The pricing Strategies of these products are considered as no frill low prices where the promotion and the marketing cost of a product are kept to a minimum.

If a business needs an injection of cash to cover short-term expenses or debt commitments, they often turn to promotional discounts. The reality is that some sales promotions offer only slight discounts off the usual price – which might have been higher than what a competitor charges anyway. However, if the price is perceived as good value it will allow for more sales and provide a decent profit margin. You might run some form of competition to draw attention to your product. Free gifts can work well - the trick is to find a gift that is inexpensive but at the same time attracts customers.

Geographical pricing

Is there the capacity to support a huge spike in business? If you are a premium brand like Apple, you only discount select products at certain times of the year, such as laptops for during the back-to-school season. If you are a value brand like Kohl’s, a discount strategy might be one of your brand’s core attributes. An effective promotional pricing example targets certain buyer segments, such as students, teachers, seniors, or the military. Survey found that when it comes to customer acquisition, nearly 1 in 4 marketers—the most respondents among six categories—say differentiation from competitors is their most challenging problem. The urgent need to stand out is driving more frequent promotions across industries, but in a marketplace overrun with competing ads, they’re inadvertently adding to the noise. For simple reasons such as the geographic location the companies do vary or change the price of the product.

Why Use Promotional Pricing?

In the case of goods, the prices are often based on the cost of produc­tion. For example, the price of petrol or diesel in India is based on the cost of oil in the international markets. Similarly, in the case of serv­ices, the cost-based pricing serves as the basic or starting point for the services. Cost-based prices are calculated based on certain accumulation of the accounting data. In the case of services, each of the pricing strategies represents a marketing solution to the service provider.

When items are on sale regularly, consumers who know your company, brand, or service will begin to question the Why Use Promotional Pricing? overall quality that you offer. A shirt that is always on sale for $20 becomes a shirt that is worth $20.

Many online shoppers place an item in their cart and then check out other retailers to find better deals or look for coupon codes. About 54 percent of shoppers will completely abandon their shopping carts and go spend money somewhere else if they find a better deal. On the other hand, a poorly planned discount strategy can reduce the sense of urgency needed to encourage shoppers. That’s why it is important to carefully plan out promotions and make them worthwhile. They can send messages about your product and your company, and they can give customers a reason to buy. Promotional pricing lowers consumer costs to encourage sales.

The more data you have the more you can be sure that your promotion will go in the right direction. First, you need to decide why you want to promote and what it is that you want to promote. Are you looking to promote an idea, a new product or a campaign? After you have decided the thing you want to promote you have to know your target audience and the platforms where your target audience can be best targeted. For example, you won’t want to think of promoting something for teenaged target audience and choose newspaper as the primary mode of marketing. Maintain current customer loyalty.Promotion can be a form of company appreciation to their loyal customers. Promotional pricing can also hamper your relationships with your competitors.

We are familiar with the general axiom that higher prices reduce the quantity demanded and vice versa. While cost-based pricing may be the easiest to implement, the pric­ing in this manner is not always practicable to implement. Thus the service provider may be able to charge even Rs. 40 in the case of a trouser but not more than Rs. 15 for a handbag. However, there are quite a few limitations of this cost-based pricing. They may agree to different daily rates for the engineer, supervisor, draughtsman, quantity sur­veyor, etc.

Yes, while they are your competitors, they aren’t your enemies. Learn modern and instantly applicable techniques to find new clients with bigger budgets and get your first brand strategy clients in just two weeks. Be loyal to your existing pricing model, play the long game, and only use pricing promotions in a way that will keep your brand equity intact and boost your profits while you do it.


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