Various Promotional Pricing Strategies Are in the Market

Pricing is the only P in the four Ps of marketing that brings in revenue for the company. Pricing also plays a vital role at the time of the purchase of the goods. It is a driving factor that determines whether the product will be purchased by the consumer or not. In developing price-sensitive countries like India, Pakistan, China, and others, the pricing of the product plays an important role in purchase decision-making. Pricing, in simple terms, means how much currency the customer has to forgo to obtain ownership of the product or experience the service delivered by the brand. It is the cost that the customer pays to the brand to gain the experience.

In this article, we will be understanding the various promotional pricing methods that different companies can adopt to suit their needs and how the pricing works across international borders as well.

Various pricing techniques used within international borders

Not all countries have the hard currency to pay for the product that they want to import; they fall short of cash. Hence, companies cannot just rely on one method of exchanging money; they have to develop different schemes for the profitability of both countries. Some of the pricing methods that companies can adopt while deciding the price internationally are −

  • The barter system − it is an age-old system in which companies exchange goods or services not in lieu of money but in lieu of other goods and services. So, for example, if India today is importing crude oil and gas from Russia, instead of giving them money, they can give them some of the harvests India produces, like rice, wheat, and others. This helps countries and companies develop healthy and growing trade relationships.

  • Compensation deal − this is a method in which the seller and the buyer decide to pay a certain percentage of the deal in cash and the rest of the payment is done in kind.

  • Buyback agreement − This is a method in which the sellers accept some percentage of the payment in cash and for the rest of the payment they promise to buy back the goods manufactured by the particular technology. For example, if I am buying an umbrella-making machine from China, they have agreed to accept 50% cash payment and the rest in the form of umbrellas manufactured with the delivered technology.

  • Offset − This is a situation that generally happens between countries. Here the buyer and seller agree on receiving the entire payment in cash, but after that, the seller country has to spend a certain "x" amount in the country in the stated time period. This ensures that the country has sales and is flourishing.

Promotional pricing methods that the brand can adopt

Brands have to promote their products in order to engage in sales. However, instead of promoting the product and its features, the brand decided to promote its price. Various promotional pricing methods that a brand can adapt to are −

  • Loose leader pricing − This is a situation in which the store owners in big supermarkets reduce the price of the leading products and brands. This is being done by the store owners to bring in additional foot traffic to the store. The reduced margin that the store owners earn because of loss leader pricing is made up by the sales of additional items in the supermarket. This is a very effective way to encourage customers to visit the store. Though this method of pricing is not preferred by the brands or other retailers, Brands feel that their brand image might dwindle because of the excessive discount, and they might receive complaints from other retailers.

  • Special event pricing − This is a situation in which store owners provide special and extra discounts on brands and products. This is done on various big occasions to increase the volume of sales, get rid of excess inventory, and attract more customers. In India, we see the Big Billion Dhamaka and more such offers on Diwali, Puja, Eid, and other such festivals.

  • Special customer pricing − Here the marketer or the retailer charges different prices for different customers. For example, if you are a member of a store or club, you will receive an extra 10% discount over regular customers. This is a method used by companies to earn more and more brand loyalty because it is always more cost-effective to retain customers than to attract new ones.

  • Cash rebates − This is a situation in which the seller offers the customers chase rebates if they purchase the good within the specified time period. This method is adopted by the sellers to get rid of excess inventories and, more importantly, reduce the sales turnover time for heavy and expensive products like automobiles, jewelry, and others.

  • Low-interest financing − This is a situation in which the seller offers low-interest financing to the customers to close the purchase deal. It is generally done in the case of products with a high investment, like jewelry, electrical appliances, or automobiles. Some of the companies even offer no-interest financing for their customers.

  • Psychological pricing − This is a situation in which the company or the retailer would mark up the price at a higher level and then provide discounts to the customers. Now the customer is thinking that they are getting the product at a reduced price and making the purchase decision, but in reality, the seller is still making a substantial profit from sales. In today’s business environment, most e-commerce companies or products listed on different platforms use this strategy. It is effective at driving sales and customers for the brand.

  • Longer payment terms − This is a situation in which the company will advertise to the customers that they are offering longer payment terms. Again, it is generally done in the case of high-priced goods because most customers do not have the ability or would want to incur such costs in one go. For example, if the market is working on a lease period of 1 year for the down payment of your cell phone, the retailer can offer a down payment period of 15 months to the customers to attract them to purchase from the shop.

  • Warranties and service contracts − Another promotional pricing method by the company could be to offer the customers extended or additional warranties and service contracts. Customers will not run for the lesser price, and the image of the store will also increase for the customer. For example, if the retailer provides its customers with a 1-year warranty contract, the shop owner might provide them with free service for another year if the purchase is made from their shop.

Promotional pricing strategies are different ways adopted by retailers or shop owners to attract customers. Here, the brand does not offer any special discount to the customer or consumer; it is done by the shop owner or retailer to bring in more customers and volume sales for them. Another benefit of using promotional pricing techniques is that shop owners and retailers can attract new customers in a price-sensitive market as well as retain their existing ones.

Sellers have to understand that they cannot follow the age-old method, and we are not in the product era where customers will accept whatever has been given to them. We live in an era where customers are gods for the company, and there is intense competition for success.

Updated on: 21-Apr-2023


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