Pricing Your Product or Service

10. Special Tactics

There may be times when the right price is dictated by factors other than cost or perceived value. Tactical pricing can be used to achieve many different objectives.

10.1 Odd value - the retailer's habit of selling something for £9.99 instead of £10.

• This signals price awareness and is useful in creating a favourable impression to cost-conscious customers.

10.2 Loss leaders - selling some products cheaply to win new customers.

• You may include a couple of zero mark-up products in your range for this purpose. Or you may offer lower prices to new customers, reverting later to normal prices.

10.3 Price war - deliberately undercutting rivals to win market share from them.

• Will it hurt you more than it hurts them? If you are a start-up, the competition may have deeper pockets than you.
• Will your new customers stay with you when the prices go back up?

10.4 Skimming - selling a unique product at a high price until all customers who need it have bought it.

10.5 Penetration - the opposite of skimming.

• This tactic involves starting a product at a low price and getting the market sewn up before competitors can catch up with you.
• With significant market share under your belt, you find ways to raise prices later.