psychological pricing

Examples of psychological pricing in the following topics:

• Psychological Pricing

  • Psychological pricing is a marketing practice based on the theory that certain prices have meaning to many buyers.
  • One such meaning is often referred to as the psychological aspect of pricing.
  • Inferring quality from price is a common example of the psychological aspect of price.
  • Another manifestation of the psychological aspects of pricing is the use of odd prices.
  • Psychological pricing is one cause of price points.

• Demand-Based Pricing

  • These include: price skimming, price discrimination, psychological pricing, bundle pricing, penetration pricing, and value-based pricing.
  • Price skimming is a pricing strategy in which a marketer sets a relatively high price for a product or service at first, then lowers the price over time.
  • Psychological pricing is a marketing practice based on the theory that certain prices have a psychological impact.
  • Penetration pricing is the pricing technique of setting a relatively low initial entry price, often lower than the eventual market price, to attract new customers.
  • By definition, long term prices based on value-based pricing are always higher or equal to the prices derived from cost-based pricing.

• Lifestyle

  • In consumer marketing, lifestyle is considered a psychological variable known to influence the buyer decision process for consumers.
  • However, in consumer marketing, lifestyle is considered a psychological variable known to influence the buyer decision process of consumers.
  • In this theory, the marketing stimuli (product, price, place and promotion) are planned and processed by companies, whereas the environmental stimuli are based on the economical, political, and cultural circumstances of a society.

• Stimulating Demand

  • The field of psychology defines motive as the inner drive or pressure to take action to satisfy a need.
  • The sources of this arousal may be internal (such as hunger); environmental (viewing a McDonald's advertisement); or psychological (thoughts about food, which can cause hunger).
  • Benefit segmentation may include consumer labels such as price-conscious, convenience-oriented, service-oriented, or other motivation features.
  • Discuss the psychological factors that drive consumer demand, and how they play into marketing segmentation

• Determining Segmentation Variable(s)

  • Markets can be segmented primarily according to geographic, demographic, usage, and psychological segments--or a combination of the above.
  • Income seems a better basis for segmenting markets as prices for a product increases.
  • Segmentation should recognize psychological as well as demographic influences.
  • If people with similar attitudes can be isolated, they represent an important psychological segment.
  • People with similar physical and psychological characteristics may be similarly motivated.

• Competitor-Based Pricing

  • Competition-based pricing describes a situation where a firm has a pricing policy that reflects the pricing decisions of competitors.
  • Competition-based pricing describes the situation where a firm does not have a pricing policy that relates to its product, but reflects the pricing decisions of competitors.
  • Similar to competition based pricing, going rate pricing reflects the price that is being used by most of the companies within the industry, an industry standard more or less.
  • It can lead to price wars.
  • Show the basis of competitor-based pricing as a general pricing strategy

• Cost-Based Pricing

  • Cost-based pricing is the act of pricing based on what it costs a company to make a product.
  • Cost-based pricing is the act of pricing based on what it costs a company to make a product.
  • Cost-based pricing involves setting a price such that:
  • Cost-based pricing is included in what is considered the "3 C's" of pricing.
  • Describe cost based pricing as it relates to general pricing strategies

• High/Low Pricing

  • High-low pricing is a strategy where most goods offered are priced higher than competitors, but lower prices are offered on other key items.
  • High-low pricing is a method of pricing for an organization where the goods or services offered by the organization are regularly priced higher than competitors.
  • The lower promotional prices are designed to bring customers to the organization where the customer is offered the promotional product as well as the regular higher priced products.
  • High-low pricing is a type of pricing strategy adopted by companies, usually small and medium sized retail firms.
  • The way competition prevails in the shoe industry is through high-low price.

• Value-Based Pricing

  • Value-based pricing seeks to set prices primarily on the value perceived by customers rather than on the cost of the product or historical prices.
  • Value-based pricing sets prices primarily, but not exclusively, on the value, perceived or estimated, to the customer rather than on the cost of the product or historical prices.
  • How important is price?
  • Examples include matching the price of competitors, a traditional price charged for a particular product, and charging a price that covers expected costs.
  • Examine the rationale behind value based pricing as a pricing tactic

• Settling the List Price

  • A list price must be close to the maximum price that customers are prepared to pay and yield the maximum profit for the retailer.
  • Pricing is a key variable in micro-economic price allocation theory and part of the four "P's-" of the marketing mix; pricing, product, promotion and place.
  • The manufacturer's suggested retail price (MSRP), list price or recommended retail price (RRP) of a product is the price which the manufacturer recommends to the retailer.
  • Retailers must ask questions to set a list price.
  • A good pricing strategy is one that strikes a balance between the price floor (the price below which the organization ends up in losses) and the price ceiling (the price beyond which the organization experiences a no demand situation).