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)