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Pricing Practices

On July 11th, 2012, Posted by Author No Comments

What are Pricing Practices?

pricing practices 1Pricing practices are used by manufacturers and retailers to attract more customers and increase their sales. Pricing practices can affect the consumer behaviour and their value perceptions. They do this through advertisements and offers such as discount sales, timed sales, bundle offers, online plans and so on. Pricing practices are aimed at reducing consumer search – meaning, the consumers are attracted to the offers or sales purchase the product without calculating the actual benefits that they have got and without searching for a better product or one with more desirable features in it.

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What are some of the different pricing practices?

Common pricing practices include: splitting the price into the actual base price and the other applicable taxes or charges, advertised reference prices, and bundle offers.

pricing practices 2Pricing practices involving the splitting up of the price into base prices and the applicable taxes and surcharges tend to confuse the customers as they only notice the base price and fail to calculate the total price, assuming that the surcharges and taxes are the same for all similar items. This lower price registers quickly and the consumer is prone to pick up that product instead of one with the total price printed because they underestimate the price.

Pricing practices using advertised reference price serve to enhance the purchasing intentions of the consumer although they may not trust the truthfulness of the advertised reference price or even when such prices are disparately greater. This works especially in situations where the consumer is unable to access a comparison of the item with similar products from other companies, such as boutique items, exclusive products and those sold directly without a middleman.

Pricing practices that are bundle offers, with an extra item being offered free or at a lesser price. These offers may initially improve sales but the consumer is aware that it is strategy to raise the price of the product and subsequently sell the product at the new price without the free item added on. There are also offers where the items are offered at a rebate if the volume of the purchase is more, for instance four-in-one-pack, five-kilo-pack and so on.

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