Pricing Strategies
Essay by renisyce_goh1018 • March 13, 2013 • Essay • 858 Words (4 Pages) • 1,402 Views
Product line pricing
Product line pricing is setting the price steps between various products in a product line based on cost differences between the products, customers evaluations of different features, and competitors' prices.
Product line pricing is used when a primary product is offered with different features or benefits, essentially creating multiple "different" products or services. For example, McEgg Deluxe could be the primary product. It could come standard, with French fries and soft drink all the features and add-ons. The set of McEgg Deluxe would then be priced accordingly on RM 5.95.
The pros of the product line pricing to maximize profits. The more features offered, the more consumers will pay. The goal is to draw enough interest in the primary product that the upgraded product will be sold.
The cons of these pricing strategies is the shortage of products in McDonald, therefore they limited the product for specific time only.
Market- penetration pricing
Market- penetration defined the firm setting the low price for a new product in order to attract a large number of buyers and a large market share.
The advertisements show that McDonald had offered the new product which is McEgg Deluxe and Beef & Egg on lunch and dinner. Since the product is new, McDonald in order to set the low prices to to attain the high profit and sales besides to make it possible to produce larger quantities. The price of set of McEgg Deluxe is from RM7.80 to RM5.95 and set of Beef & Egg is RM9.35 to RM5.95.
The pros of the market-penetration pricing are the sales volumes should be high, so distribution may be easier to obtain. The low price can act as a barrier to entry to other potential competitors considering a similar strategy. Besides that, the emphasis on keeping the price low helps in controlling the cost thereby cost efficiency is achieved.
When market penetration has been achieved, prices can be raised. Customer expects the prices to remain low for a long term. They are not ready for the subsequent rise in the price and when it happens they might switch to a competitor's product. Examples, the price from RM5.95 raised to Rm7.50 again. Thus subsequent price hike leads to loss of market share gained in the cons of these pricing strategies.
Segmented pricing
Segmented pricing is selling a product or service at two or more prices, where the difference in price is not based on differences in costs.
From the advertisement show that McDonald sells the product at two prices, even though the difference of prices is not based on differences in costs. Under the time-pricing, McDonald varies its price by time of day and hour. Examples, the price of McEgg Deluxe
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