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Journey 2: Strategic Marketing

Pricing Strategy

Pricing Like A Pro

PRICING LIKE A PRO

There are several different pricing strategies a
business can use.

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BUNDLING PREMIUM
Selling or packaging Pricing a product at the
goods or services at a high end of a price range.2
lower price than if they
were each bought Examples: Tory Burch | Rent
separately.1 the Runway | Mercedes
Benz
Examples: Spectrum | AT&T
Luxury brands use this
By bundling cable, Internet, strategy based on
and phone services, customers' perceived value
telecommunication and willingness to pay
businesses can offer more.
customers a discount while
still making a profit, by
selling more overall
services.

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FREEMIUM PENETRATION
Offering products for free Maximizing the quantity
or at an extremely low sold and increasing
price while encouraging market share by offering
customers to buy low prices.4
premium features.3
Examples: Motel 6 | FritoLay
Examples: Pandora | Spotify
| LinkedIn To quickly penetrate the
market, companies often
Want to download music or offer new or competing
listen ad-free? Or do you products at steep
want to reach out directly discounts.
to a recruiter for a job
opportunity? You’ll need to
upgrade to a premium plan.

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SKIMMING PSYCHOLOGICAL
Selling a product at the Based on the theory that
highest possible price, certain prices and how
often to early adopters.5 you display them increase
customers' willingness to
Examples: Apple | Sony purchase products.6
Electronics
Examples:7 Department
Apple knows a certain Stores
customer segment will pay
a very high price for the Pricing items a few cents
latest iPhone, so they less than a price expressed
“skim” off this customer in full dollars ($9.99 instead
segment. of $10.00), or displaying
prices with smaller font size
($39 vs $39).

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ECONOMY QUANTITY
Pricing products at the DISCOUNT
lowest end of a price Offered to customers who
range to attract the most buy in bulk.9
price-conscious
consumers.8
Examples: Sam’s Club |
Costco
Examples: Dollar Tree |
Family Dollar
Using “economies of scale,”
businesses are able to pass
Businesses that offer along cost savings to
generic products or “store” customers who purchase
brands are employing this items in bulk.
strategy.

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CUMULATIVE SEASONAL
QUANTITY DISCOUNT
DISCOUNT Offered during certain
Offered to customers who times or seasons.11
buy large quantities over
a period of time but don’t Example: Southwest
place a large stand-alone Airlines | Hilton Hotels and
order.10 Resorts

Examples: CVS Extra Bucks | The travel and hospitality

Starbucks Rewards industries often offer
discounts based on time,
Any type of punch card or day, or season of travel.
other loyalty program falls
into this category.

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CASH DISCOUNT TRADE DISCOUNT

Offered to customers who A discount offered to the
pay their bill before a members of the
specified date or distribution channel.13
customers who pay with
cash instead of credit.12 Example: Furniture store

Examples: Mac Mart food Some furniture stores offer

truck | Shell gas stations discounts to designers. This
is a common practice in
When you’re at a gas other industries.
station, you’ll often see two
different prices for a gallon
of gas depending on if
you’re paying with cash or
credit. The same is often
true for food trucks.

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KEY TAKEAWAY
Knowing what works in your marketplace and having a
clear understanding of cost is critical in whether a business
makes money or not. You also want to ensure your pricing
strategy is in alignment with your marketing strategy.
Pricing can make or break your business, so it's important
you calculate different price points for your products and
explore which pricing strategy is best for your business.

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Resources

1
Cam Merrit, Bundle Pricing Strategy, Chron (2018), https://smallbusiness.chron.com/bundle-
pricing-strategy-67049.html (accessed Jan. 7, 2019).
2
Introduction to Pricing, U.S. Small Business Administration (2018),
https://www.sba.gov/course/introduction-pricing/ (accessed Jan. 7, 2019).
3 Vineet Kumar, Making "Freemium" Work, Harvard Business Review (May 2014),

https://hbr.org/2014/05/making-freemium-work (accessed Jan. 7, 2019).

4
Introduction to Pricing, U.S. Small Business Administration (2018),
https://www.sba.gov/course/introduction-pricing/ (accessed Jan. 7, 2019).
5
Ibid.
6
Ibid.
7
Nick Kolenda, Pricing Psychology, Nick Kolenda Psychology & Business,
https://www.nickkolenda.com/psychological-pricing-strategies/ (accessed Jan. 7, 2019).
8
10 Most Important Pricing Strategies in Marketing (Timeless), EDUCBA,
https://www.educba.com/pricing-strategies-in-marketing/ (accessed Jan. 7, 2019).
9
Introduction to Pricing, U.S. Small Business Administration (2018),
https://www.sba.gov/course/introduction-pricing/ (accessed Jan. 7, 2019).
10
Ibid.
11
Ibid.
12
Ibid.
13
Ibid.

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