Low or High pricing strategy

Question

What is Low or High pricing strategy and what are their advantages and disadvantages?

Answer 1

Everyday low/high pricing strategy is also called as value based pricing. It is the pricing strategy in which a product's price is actively dependent upon its demand. Therefore the prices keep changing actively everyday with reference to the demand of the product. If the demand is high the price is high and vice versa.

ADVANTAGES OF EVERYDAY LOW/HIGH PRICES:

• It takes into account industry structure, segmentation, competitor pricing practices, and substitutes and alternatives, all of which can make pricing more coherent and complex.

• Value-based pricing can be the only way to price new products or "breakthrough" products.

• Pricing can be based on several customer-focused methods: expert opinion, customer surveys, price experiments (for example by using conjoint-analysis theories and techniques), and analysis of past, present and expected market data and conditions.

DISADVANTAGES OF EVERYDAY LOW/HIGH PRICES:

• It requires more data gathering and analysis than market-based or cost-plus approaches.

• The process for determining price is more complex than other approaches because it uses "soft" market data in addition to "hard" market data.

• Most methods used to gather data for this type of pricing are relatively specialized and require expertise to convert raw data to information to knowledge (i.e. needing adequate level of resources and systematic business intelligence and customer insight process in place). Thus, for small and mid-size companies find difficult to do by themselves (outsourcing always a possibility).