Kotler’s Pricing Strategies

One of the most widely used models of Philip Kotler in the field of strategic marketing is Kotler’s Pricing Strategies. The framework examines the different pricing strategies and discusses the importance of understanding the customer’s value perceptions as well as other internal and external factors while setting prices.

What is a price?

First of all, let’s go back to the basics. A price can be defined as the amount of money a customer pays in exchange for a product or service offered by the firm. Yet, price is much more than that. The price of an offering is the value that customers are willing to give in order to gain the benefits of having the product. It therefore indirectly represents how customers value your product or service. Are they willing to pay a little extra for your product in order to have a higher quality product? How price sensitive are they when the price of the offering rises or drops? By examining these questions, you can get a rough idea of how customers perceive and evaluate your product or service in their head.

Price Quality Matrix

Having everything said above in mind, we can move on and look into nine pricing strategies as identified by Philip Kotler. These strategies are related to price against quality.

1. A Premium Pricing strategy sets a higher price for a higher quality product or service. This strategy is used when the competition is low or when a strong brand image is dominating the market.

2. A High-Value strategy offers exceptionally high quality in order to achieve product-quality leadership. This strategy is ideal for penetration.

3. A Superb Value pricing strategy is often used by market players who are trying to aggressively gain market share over competitors. Here, high product quality is offered at a low price.

4. Moving on to the Good Value Pricing, this strategy offers a fairly good product quality at a low price in order to capture market share and maximize sales growth.

5. Average pricing offers a medium quality product for an average price. The value of the product is in line with its price.

6. As its name implies, the Over Charging pricing strategy offers lower than the price point justifies. Even if the quality is acceptable, higher prices need to be justified in the mind of the consumer.

7. Economy Pricing is a low-budget pricing strategy that offers just what the price justifies. This strategy is well suited to the firm looking to build customer relationships and attract price-sensitive consumers.

8. The False Economy strategy is a dangerous zone to be. Here, low-quality products are being overpriced. You should either move to an Economy pricing strategy where a lower price is offered or alternatively enhance the quality of products offered.

9. The Rip Off strategy is a stay-away zone since low-quality products are being marketed on a high price point. This strategy is the sure path to unhappy customers and the start for declining performance.

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