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. 2010 Aug 17;6(8):619–626. doi: 10.4161/hv.6.8.11563

Table 2.

Examples of pricing strategies

Strategy Price Circumstances/Comments
Cost-Based (pricing based on cost of product)
Cost-Plus Cost + Desired Profit Margin
  • Guarantees profit

  • Inelastic-demand and little competition

Target-Return Cost × Desired Return on Investment
  • Guarantees profit

  • Inelastic demand and little competition

Geographic/Seasonal/Population Different price for different locations, groups or seasons
  • Different costs for different locations, groups or seasons

Competitor-Based (pricing based on prices of competing products)
Price-Matching Price = competitors
  • Other advantages (e.g., lower cost) over competitors

  • Large target population

  • May want to maintain status quo

Price-Undercutting Price << competitors
  • Elastic demand

  • Maximize quantity sold

Demand-Based (pricing based on customer demand)
Skim Pricing High for customer segment that has inelastic demand
  • Customer segment with inelastic Demand

  • Maximize profit margin

Penetration Low to maximize adoption
  • Large Target Population with highly elastic demand

  • High production capacity

Premium (prestige) High to signal quality
  • Quality important to customers

  • Variable quality among competing products

Economy Low to maximize quantity sold
  • Highly elastic demand

  • Low costs

Captive Product Very High for Customers who must have the product
  • Essential product with few alternatives

  • Maximize profit margin

Geographic/Seasonal/Population Different price for different locations, groups or seasons
  • Different demand for different locations, groups or seasons

Portfolio-based (pricing based on other products in the manufacturer's portfolio)
Price Lining Similar price for all product offerings
  • Simplifies accounting

  • Less flexible

Bundle Price for combined package of several products
  • Products naturally fit together

  • Similar customers demand similar products

Product Line Price different products in portfolio based on their relative value
  • Easy to assess differential value of different products

  • Elastic demand

Goldilocks (Framing) High so that lower priced products looks better by comparison
  • Lower priced similar products in portfolio

  • Elastic demand

Loss Leader Very low to draw customers to portfolio
  • Goal is sell other products

  • Customer loyalty to portfolio

Optional Product Offer “extras” for additional price
  • Product has accessories/options (e.g., vaccine administration devices)