Non Pricing Strategies Essays On Music

Companies compete with each other using both pricing and nonpricing strategies. The strategy a company decides to use depends on several factors. Different types of pricing strategies deal with manipulation of profit over costs, while nonpricing strategies have to do with promotion and advertising unrelated to pricing changes.

Differences

Choosing between a pricing or nonpricing strategy depends on the type of business you have and your niche market. In an oligopoly (where competition is limited), nonpricing strategies can have more effect on the consumer. Pricing strategies work better for smaller businesses that can easily manipulate prices to attract consumers. Competitive markets have low influence on price, since the market establishes the prices, but they may take advantage of short-term pricing strategies to attract consumers. However, to have a lasting effect on consumers, nonpricing strategies usually work better for competitive markets. All types of businesses may, at some point, be able to apply both types of strategies, depending on their needs at a particular moment.

Pricing Strategies

Pricing strategies are complex, as you have to consider several factors that may affect your business. Such factors include competitors and their existing products, consumer demands and suppliers. As a business owner, you may choose from various types of pricing strategies, such as membership or trade pricing, penetration pricing, discounts, closeout or product bundle pricing and geographical pricing.

Membership or Trade

Membership or trade discounting is a type of pricing strategy for consumers who are usual buyers of your products. This strategy consists of reducing the price of services or goods for people who are regular clients of your company. This gives clients an incentive to come back to your company and continue purchasing your products or services.

Penetration Pricing

Penetration pricing is a type of marketing strategy that consists of decreasing the prices of your products or services temporarily. The decrease in price you offer must be low enough to attract attention. Generally, penetration pricing does not cover the costs of your products, and for this reason, it is only a temporary strategy, or otherwise your business would go bankrupt. Penetration pricing is a strategy used when you have an especially unique product to promote. You use penetration pricing to make your product or service known. In the long term, when customers have responded to your product, you can then set a higher price.

Bundle Pricing

Bundle pricing and closeouts are useful when some of your products are no longer in season and you need to sell most or all of them to avoid taking a loss. For example, if you are the owner of a record store, product bundling means taking dated pop CDs and selling them in a bundle for a lower price. A closeout is useful when you own an electronics shop, for example, and you have a stock of outmoded cell phones. In such a case, you could sell them for a low price relative to the market.

Geographic Pricing

If you sell your products internationally or in different states, you may consider setting the price of your products lower or higher in each place. Determine this by analyzing the market and the prices of the same products in that place. For example, as of 2010 according to OANDA Corporation, a McDonald's Big Mac had a value of $4 in the U.S., $5 in Australia and Brazil, $2 in Hong Kong and $8 in Norway.

Nonpricing Strategies

Nonpricing strategies include advertising, enhanced service quality, longer opening hours and extended warranties. These strategies are crucial to oligopolies, such as the soda industry. If you are running an oligopolistic business, then the nonpricing strategy is the best thing to apply to maximize consumer response and improve market performance. Pricing strategies in an oligopoly do not easily work to optimize consumer response because competitors can quickly adapt to any price changes.

About the Author

Ronald Kimmons has been a professional writer and translator since 2006, with writings appearing in publications such as "Chinese Literature Today." He studied at Brigham Young University as an undergraduate, getting a Bachelor of Arts in English and a Bachelor of Arts in Chinese.

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In a competitive market, various firms vie for the business of the same potential buyers. They often do so by cutting costs whenever they can, which allows them to pass the savings on to customers in the form of lower prices. However, trying to offer a lower price than a competitor is not the only way of competing. Other methods can prove even more effective for firms, though they can sometimes have downsides as well.

Quality

If consumers must choose between two products of the same price but they can see that one is of a higher quality, they generally pick the product of higher quality. In this way, if a firm can figure out how to produce an item at a cost comparable to what its competitor charges but make it of higher quality, that firm may be able to steal the market from its competitor. However, a problem with this approach is that it may take some time for consumers to realize any difference in quality.

Perception and Branding

In some cases, little possibility of quality differentiation exists between two products. For instance, in the United States, blue jeans have little actual quality variability from one producer to another. For this reason, a number of producers compete by manufacturing a perception of high quality with their brands. This allows some companies to charge higher prices for seemingly identical products because consumers see value in the brand itself. However, the long-term sustainability of such an approach may be difficult because, as such brand advantages arise through consumer trends, consumer trends may also lead to their demise. For instance, if consumers no longer see a clothing brand as fashionable, the manufacturer may not be able to continue charging high prices for its products.

Product Design

In some cases, firms may compete by changing the design of their products to make them more appealing without significantly changing production costs or quality levels. Such a strategy can prove effective at stealing business from competitors, but it can also backfire, because it can cause the company to alienate its existing consumers, who may be knowingly choosing the existing design over other products with different designs specifically because it appeals to their tastes.

Product Differentiation

Not all consumers are the same. Markets consist of men and women from diverse age, ethnic and economic groups. Such groups tend to gravitate toward particular products as a bloc. For this reason, firms should not expect a single product to appeal to every consumer in a market. By offering a range of similar products geared toward different market sectors, firms can expand their market base. However, such product differentiation can result in significantly higher overhead costs for production.

Sales Structure

When two firms are competing with similar products, one may be able to enjoy more market share and a deeper level of penetration due to a more effective and aggressive sales structure. By engaging in direct sales, firms can appeal to prospective buyers who otherwise would not feel compelled to buy due to advertising or other kinds of marketing. Multilevel marketing is one way in which firms rapidly build their consumer base. However, by turning buyers into sellers as well, such schemes may require significantly higher prices.

About the Author

Ronald Kimmons has been a professional writer and translator since 2006, with writings appearing in publications such as "Chinese Literature Today." He studied at Brigham Young University as an undergraduate, getting a Bachelor of Arts in English and a Bachelor of Arts in Chinese.

Photo Credits

  • Hemera Technologies/Photos.com/Getty Images

Suggest an Article Correction

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