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A business can use a variety of pricing strategies when selling a product or service. To determine the most effective pricing strategy for a company, senior executives need to first identify the company's pricing position, pricing segment, pricing capability and their competitive pricing reaction strategy. [ 1 ]
Sears often used the good–better–best strategy in its mail-order catalog, for products such as Craftsman tools. [4] In the 2000s, Sears and Kmart, which were owned by the same parent company, included celebrity brands like Martha Stewart Living and Ty Pennington Style in their good–better–best tiers.
Price optimization utilizes data analysis to predict the behavior of potential buyers to different prices of a product or service. Depending on the type of methodology being implemented, the analysis may leverage survey data (e.g. such as in a conjoint pricing analysis [7]) or raw data (e.g. such as in a behavioral analysis leveraging 'big data' [8] [9]).
Within the strategy of value-based pricing, the price is not dependent on its cost of production, but instead, it is set with consideration upon the consumers perceived value and willingness to pay for the good or service. [4] This pricing strategy should have an even power balance between the seller and the buyer, maintain a long-term and ...
Yield management (YM) [4] has become part of mainstream business theory and practice over the last fifteen to twenty years. Whether an emerging discipline or a new management science (it has been called both), yield management is a set of yield maximization strategies and tactics to improve the profitability of certain businesses.
A dynamic pricing tool can make it easier to update prices, but will not make the updates often if the user doesn't account for external information like competitor market prices. Due to its simplicity, this is the most widely used method of pricing with around 74% of companies in the United States employing this dynamic pricing strategy. [6]
The use of premium pricing as either a marketing strategy or a competitive practice depends on certain factors that influence its profitability and sustainability. Such factors include: Information asymmetry (e.g., when buyers have no independent basis to test claims of "exceptional quality" for a particular product or service—assuming the ...
A loss leader (also leader) [1] is a pricing strategy where a product is sold at a price below its market cost [2] to stimulate other sales of more profitable goods or services. With this sales promotion/marketing strategy, a "leader" is any popular article, i.e., sold at a low price to attract customers. [3]