Price is the amount of money charged for a product or service or the value exchanged for the benefits of the product or service
For a new software product, you must understand your positioning before you set a price. Make sure it is not too low, or the product will not be taken seriously. If it is too high, the potential customer will not take the risk.
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- There are five general pricing strategies:
Product Line: Setting price steps between product line items
New Product PricingOptional Product: Pricing optional or accessory productsCaptive Product: Pricing products that must be used with the main product
By-Product: Pricing low value by product to get rid of them
Product Bundle: Pricing bundles of products sold together
- There are two new product pricing strategies:
Market-Skimming: Initially set high prices to "skim" revenue layer by layer from the market. Works when:
Quality and image support the higher priceEnough buyers want the product at that price
Cost of producing a small volume cannot be high
Competitors should not be able to enter the market easily
Market Penetration: Set a low initial price in order to penetrate the market quickly and deeply to win a large market share. Works when:
Price AdjustmentMarket is highly price sensitiveProduction and distribution costs fall as sales volume increases
Low price must help keep out the competition
- The following are price adjustments based on changing situations:
Discount & Allowance: reduced prices to reward customer responses such as paying early or promoting the product
Discriminatory: adjusting prices to allow for differences in customers, products, and locations
Psychological: adjusting prices for psychological effects. Ex: $299 vs. $300
Value: adjusting prices to offer the right combination of quality and service at a fair price
Promotional: temporarily reducing prices to increase short-run sales
Geographical: adjusting prices to account for geographic location of customer.
International: adjusting prices in international markets