According to (Ali & Anwar, 2021), Companies' understanding of powerful pricing strategies and their applications work to achieve maximum profitability and continuity in the success of their products and services.
In this paper, we will discuss pricing strategies, differentiated pricing, benefits and disadvantages, value-added on price, and finally, price differentiation between the products of different companies.
Pricing Strategies
Products and services are priced according to three criteria: the first is based on cost and adding a particular profit margin; the second is based on the market and the product or service's competitive position among other products and services; and the last is value-based pricing, which is based on the customer's view of the product and service and its superiority over others (Schindler & Schindler, 2011).
Differentiated Pricing
According to (Bitar & Low, 2012), this term means that the customer pays less for the same product than others. This may come in the form of specific discounts, a temporary offer, targeting a particular group of people using a discount coupon, or even buying a more significant number of the same product to get the discount.
Benefits and disadvantages
The benefits of differentiated pricing include expanding the customer base, as lower prices make them more attractive and lead to increased sales. Still, on the other hand, this comes with some disadvantages in the long run because the profit margin is small, and if prices return to their current levels, the customer may move to other products (Stern, 1989).
Value-added pricing
This definition includes adding new features and services to the product and service that make them superior to the products and services of competing companies (Zhang, Han, Liu, Liu & Leng, 2015). This leads to another definition, product differentiation, which has three types. The first is horizontal differentiation, which adds higher quality to the product to distinguish it from others; the other is vertical differentiation when the product is unique with a specific feature that makes it unique among competitors. Finally, simple differentiation is adding a large number of characteristics that all competitors have.
Conclusion
In contemporary marketing, the value of the product is determined based on many internal factors, such as the cost of the product and the volume of production, and external factors, such as the market situation, demand for the product, product value, and the strength of the brand among competitors. Product price discrimination occurs when the same product is sold at a higher price than competitors, and its price is much higher than its actual cost; you can see this in all famous brands, especially luxury products.
References
Ali, B. J., & Anwar, G. (2021). Marketing Strategy: Pricing strategies and their influence on consumer purchasing decisions Ali, BJ, & Anwar, G.(2021).
Marketing Strategy: Pricing strategies and their influence on consumer purchasing decisions. International Journal of Rural Development, Environment, and Health Research, 5(2), 26-39.
Bitar, E., & Low, S. (2012). Deadline differentiated pricing of deferrable electric power service. In 2012 IEEE 51st IEEE Conference on Decision and Control (CDC) (pp. 4991-4997). IEEE.
Schindler, R. M., & Schindler, R. (2011). Pricing strategies: a marketing approach. sage.
Stern, A. A. (1989). Pricing and differentiation strategies. Planning review, 17(5), 30-34.
Zhang, X., Han, X., Liu, X., Liu, R., & Leng, J. (2015). The pricing of product and value-added service under information asymmetry: a product life cycle perspective. International Journal of Production Research, 53(1), 25-40.