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Types of Pricing and Effective Pricing Framework Essay Example

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Types of Pricing and Effective Pricing Framework

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Types of Pricing and Effective Pricing Framework. Before discussing the marketing strategies of the effective pricing it is important to discuss some main definitions within the framework of the effective pricing. The first definition is that of the effective price, which is considered as the price received by the company after the processes of accounting for discounts, promotions, and other incentives. The other type of pricing, which should be mentioned, is price lining briefly defined as the application of the same or near the same prices to all products offered by the company. On the one hand this is beneficial for administering, but on the other hand poses the problems associated with the lack of flexibility (Johnson, 2007). One more term, which lies within the framework of pricing strategy, is “

loss leader”. This is the product, for which the seller sets the price below the operating margin. This causes some loss to the company, but the expenses are covered by the attraction of customers to the other products as well (Boone & Kurtz, 1992). This category overlaps with the category of promotional pricing, which views pricing is the main element of the marketing mix (Boone & Kurtz, 1992). Marketing managers are also well aware of the existence of the price/quality relationship, which implies that the majority of consumers are persuaded that there is a direct dependence between the price of the product and its quality, meaning that high price indicates good quality and vice versa. One of the most prominent evidence of this is the case of the snack cake Twinkies, which was considered to be of low quality solely on the basis of its lowered price (Semenik & Damossy, 1995). Prestige or Premium pricing is applied by the marketing managers in cases when they apply the price, which is at the top of the possible price range. In spite of the seeming groundlessness of this step, it still proves beneficial for the company, due to the case that the customers expect the high price to be the sign of good quality. The other explanation is the persuasion of some customers that high price is the indicator of the high status of its buyers. . Types of Pricing and Effective Pricing Framework.

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