3.12: Price Adjustment Strategies I
Price adjustment strategies refer to how companies modify their basic prices to account for customer differences and changing market conditions. These include:
- Discounts: Offering temporary reductions can incentivize purchases, reward customer loyalty, and clear out inventory—for example, seasonal or clearance sales by an apparel retailer.
- Trade-in allowances: These lower the purchase price for customers who trade in an old item, stimulating new sales. For example, Apple offers trade-in programs where customers can exchange their old devices for a discount on a new one. It helps manage the product lifecycle and fosters customer loyalty.
- Segmented Pricing: Companies can maximize profits by charging different prices to different customer segments, often based on willingness to pay or cost-to-serve differences, like airlines charging different amounts for economy and business class.
- Psychological Pricing: Prices like $0.99 instead of $1.00 can make a product seem cheaper, boosting sales. It leverages consumer perception to increase appeal.
- Promotional Pricing: Temporary price reductions or 'sales' can drive short-term demand spikes and bring in new customers, contributing to market penetration and sales growth. For example, a buy-one-get-one-free deal.
