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There are several effective pricing strategies that can increase an organization's profitability. One strategy is price skimming, where a high price is set initially and then lowered over time. This is often used for new and innovative products. Another strategy is penetration pricing, where a low initial price is set to attract customers and then it's increased once market share has been captured. Value-based pricing is another strategy where prices are set based on the perceived value to the customer rather than the cost of the product. Finally, price discrimination or versioning can be used, where different prices are set for different versions of the same product, capturing consumer surplus and potentially persuading customers to purchase larger sizes or more expensive versions.
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The company also applies price increases to certain drinks and sizes rather than the whole product line. "By raising the price of the tall size brewed coffee exclusively, Starbucks is able to capture consumer surplus from the customers who find more value in upgrading to grande after witnessing the price of a small drip with tax climb over the $2 mark. By versioning the product in this way, the company can enjoy a slightly higher margin from these customers who were persuaded by the price hike to purchase larger sizes," Price Intelligently experts say.
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Take the most advantageous pricing approach to increase profitability of your organization. Use our Pricing Strategies presentation to outline factors...
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