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DISCUSSION THREAD: PRICE
Discussion Thread: Price
Price is considered one of the most important p’s in marketing, compared to promotion,
place, and product. Next to what the product is, and who its customer is, the price will have a
monumental effect on whether that product will successfully sell, or if it will grow. Price is a
fundamental concept of the customer's perceived value of the product, therefore, if the price
does not match that of the customer's perceived value, the product will perform accordingly.
This concept can take a deep look into the psychology of the customer and is not as simple as an
outpriced value by the company compared to that of the customer. There are countless
strategies in which a company can pursue its pricing techniques, and this will vary based on
industry, competition, target market, product presentation, and the list goes on. This discussion
will analyze, in further detail, some of these strategies and examples of them in practice.
Pricing Strategy
As previously stated, the pricing of a product before placing it on the market takes deep
thought on the customer's perception, first and foremost. Understanding a customer's
perceived value of a product is the basis of how a product will be priced. The psychology goes
deeper than that, however, in that the pricing can help dictate the perceived value as well. The
quality of the actual product and the sales price can shift the perception of the customer. If a
product is considered higher quality in the market but priced lower than the competition for
whatever reason, this can undercut the customer perceived value to believe it is not of higher
quality since it is so “cheap”. This example is intended to show a shallow perspective of the
complexity that pricing strategy holds but is far more complex and can be seen through multiple
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DISCUSSION THREAD: PRICE
different lenses. These strategies are often designed by companies pricing teams who are to
analyze these complexities and decide on the pricing of the new product (Feurer et al., 2019).
Psychological Perspective
Feurer et al. researched the psychological perspective of these teams rather than the
specifically named strategies that are commonly examined in studies (2019). The findings
showed that the decision-making process took in regards how the pricing teams derived their
strategy to the prices. As can be seen, many strategies can be examined, but the difficulty lies in
when to use those specific strategies. This is the approach that Feurer et al. pursued in the
research. This examination first analyzed when rationality and intuition were used. Feurer et al.
(2019) found that rationality was used to apply strategy uniformly based on certain techniques,
while the intuitive perspective help with innovativeness in the pricing cycle. Specific accounts
and pricing strategies depended heavily on whether a pricing strategy required innovative
thought or not and not every case called for this perspective. This innovativeness was found to
be tied to the nature of the product and if it was innovatively changing the marketplace or not
(2019). The bounds of applying rationality or intuition were based on the account of whether
the market was perceiving the product.
Strategy in Practice
While the psychology of the strategic approach is important, there are a few strategies
that should be directly identified. Indounas (2020) studied three specific strategies in different
sectors of the market: skimming pricing, penetration pricing, and competitive pricing. These are
specific approaches depending on the rationality of the pricing team to use. These are less
intuitive pricing models, however. The first strategy to examine is skimming pricing, which is the
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DISCUSSION THREAD: PRICE
approach to start with the highest initial pricing and drop it over time, also known as skimming
the price (2020). This is an effective approach for products that have shorter life cycles. This is
the pricing model seen in the technology industries. The next strategy mentioned is the
penetration pricing strategy in which the initial pricing offers a lower price to capture customers
from competitors (2020). Over time, this will create a customer base in after which it will begin
to increase pricing. The final pricing strategy is mentioned in the competitive pricing strategy.
This pricing is more self-explanatory, as it follows the pricing of its competitors. Based on what
the competitor has a product on the market at, it will match that price at its entry (2020).
One last strategy is worth mentioning in this conversation of an example that shows the
pricing strategy that was based on intuitive thinking. This pricing is grown in acceptance over
the last decade and that is subscription models. While they have been seen in the past, they
have grown very popular alongside the internet movement and online sales. This strategy
utilizes a menu of multiformat subscription plans that pulls from two different bases, advertisers
and consumers (Kanuri et al., 2017). This theoretically driven pricing model helps price
subscriptions based on a myriad of factors in a rather complex approach.
Conclusion
Pricing of products can be seen as a complex process, first relying on the psychological
approach of the team pricing followed by the specific strategies that are implemented in the
process of pricing. The success of the pricing strategy is a large contingency of the success of a
product in the marketplace. This aspect of the marketing mix can make or break a product. It
controls the growth of the success of the product as well. A poorly crafted pricing strategy can
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DISCUSSION THREAD: PRICE
References
Feurer, S., Schuhmacher, M.C., and Kuester, S. (Janurary 2019). How pricing teams develop
effective pricing strategies for new products. Journal of Product Innovation
Management, 36(1), 66-86. https://web-a-ebscohost-
com.ezproxy.liberty.edu/ehost/detail/detail? vid=0&sid=b7b3e15d-8d4d-47e2-b4bb-
f443730c7907%40sessionmgr4006&bdata=
JnNpdGU9ZWhvc3QtbGl2ZSZzY29wZT1zaXRl#AN=133318797&db=bah
Indounas, K. (15 December 2020). New B2B product pricing. Journal of Business & Industrial
Marketing, 35(11), 1861-1869. https://www-emerald-com.ezproxy.liberty.edu/insight/
content/doi/10.1108/JBIM-05-2019-0187/full/html
Kanuri, V.K., Mantrala, M.K., and Thorson, E. (March 2017). Optimizing a menu of multiformat
subscription plans for ad-supported media platforms. Journal of Marketing, 81(2), 45-63.
https://www-jstor-org.ezproxy.liberty.edu/stable/44879025?pq-origsite=summon&seq=
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