The Effectiveness of a Promotional Pricing Strategy

Promotional pricing is typically used when new products are being introduced to the market. It can also be used to stimulate request for products or services with lagging demand. This strategy of price targets buyers who are finding for the deal.

Some examples of promotional pricing are:

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Special event pricing. Pricing that is 'special' (or lowered) for extra events such as Christmas, Easter, Valentine's Day, Mother's Day, Super Bowl, Thanksgiving and Back to School. Rebate programs. Such as a rebate or discount when buying a home and the seeder offers a move-in allowance, or a carpet transfer or renewal discount or a rebate for all cash, no financing, and purchases of big ticket items like cars. Low or no-interest financing. A number of furniture shop will advertise no-interest financing loans for furniture purchases. Car dealerships also offer these pricing programs - often for last year's models. This strategy has been a sales success for a number of industries in the past, be true how you use it though as consumers are becoming more sensitive to the true value of the strategy. Buy One, Get One free or Two for the Price of One. If stock costs are low, and price includes a healthy behalf margin, this may be a good strategy to use if you have an overabundance of inventory. Even best if competing pricing comparisons effect in your stock offer being the best deal. Extended cost terms. This can also be viewed as a hold and pay, or lay-away, pricing model. You typically pay a deposit and pay over time. You do not get the stock until paid up. The renewal and building business do a difference on this strategy: you normally are required to pay one third of the projected cost for the project up-front - this is to help pay for the materials; one third about half way through the project and the balance on completion. For the business-to-business market, the extended cost terms might be pay in net 30 days, or net 60 days or a discount if you pay in net 15 days. There are many variations to this pricing strategy. No charge or low-cost warranties. If a company has a good warranty or return program (good in the sense that there are no, or few, stock failures and no, or few, stock returns), then it is not a high cost investment for them to offer low cost or no cost warranties. Buyers view these types of promotional prices very unquestionably because they believe it shows that the company has high reliance in the product's performance.

The promotional pricing strategy has been over-used in the sell markets and buyers have advanced a healthy skepticism about the reality of the 'deal'. One of the most often used promotional pricing strategies is the "Going Out of Business" sale; the sale seems to last for years and the company eventually just 'goes out of business' at that location but then restarts elsewhere.

Be true with how you use promotional pricing. There is still room for some productive promotional pricing programs in the business-to-business markets; be smart in how you institute your pricing strategy.

The Effectiveness of a Promotional Pricing Strategy