Penetration Pricing is a method of setting prices for a product or service. In earlier days, it used to be done on a case-to-case basis as per the nature of the product and services being offered. But with time, there have been more approaches adopted towards pricing.
Types of pricing strategies are discussed below:
Bundle Pricing Strategy
This is a new category invented by large retailers so that they can charge whatever price they want to on individual items and not be subject to consumer laws governing false advertising and deceptive pricing practices. “Bundling” means they take several products which were sold separately at different prices before. But now sell them as one “bundle” at an inflated combined price ( advertise the hell out if it). For example, you can buy an Apple laptop at the regular price of $1,000 listed for $1,400 as part of a “bundle” package. The bundle may include software that few consumers really need and want. But they are tricked into thinking they’re getting something free. Because there is no list price for it. Does this seem like your cable TV bill?
Here’s an easy way to avoid “Bundle Pricing” entirely: Just refuse to buy anything not on a single item basis . They’ll make things up sooner or later, but stick with your guns!
This strategy involves marketing an image-intensive version of the product at a higher price than its non-glamorous counterpart. The “premium” version of the product is often just a repackaging exercise. With little additional value being added to the core product.
Just refuse to buy anything not on a single item basis . They’ll make things up sooner or later, but stick with your guns!
Premium Pricing can also include celebrity endorsements and sports stars appearing in advertising campaigns for products which have nothing whatsoever to do with sports. It’s kind of like an actor showing up in a jewelry commercial, it just doesn’t seem right somehow. Interesting fact: Celebrities require very high fees for their endorsements these days, upwards of 5 million dollars per year isn’t unknown !
Look at the label on a jar of spaghetti sauce and you will find that some have a full page photo of a smiling celebrity who is not wearing gloves while preparing the meal or washing up afterwards. Other jars don’t have this endorsement, why?
Look at the label on many cans of food, there are several with endorsements from outside people who may be related to someone in the company but they won’t admit their connection. There are even cans out there with two endorsements! What’s going on here? Is it a coincidence?
These “endorsements” then lead into commercials that talk about how wonderful the product is because some sports figure endorses them. Or how great this particular chef would cook something up for your family. If only you bought their brand of beans, rice or pasta.
Truth in advertising is a joke when it comes to food products you find on your grocer’s shelves today. But when you look closely at the label and next time you see. One of those endorsements from someone who may not even know what brand they are endorsing, think about this question. Why would an obviously upscale person be doing endorsements for cheap products? In some cases, they aren’t even endorsing anything but rather. Their names have been put onto labels just to sell more product! This is why we have the “Bull Shit” article series here at The Black Vault . Enjoy your meal!
Some companies do offer better quality foods but then again they don’t have endorsements of “famous” people on the label either. If a company is going to spend that kind of money on a certification or endorsement from a celebrity or athlete, you would think they would at least make an attempt to use some better ingredients in their products if nothing else for marketing purposes!
The upscale Paul Newman’s Own brand is one of the most successful food brands on the shelves today. But when you look closely at the label and next time you see. One of those endorsements from someone who may not even know what brand they are endorsing, think about this question. Why would an obviously upscale person be doing endorsements for cheap products? In some cases, they aren’t even endorsing anything but rather their names have been put onto the product and they get a paycheck for it.
Disadvantages of pricing strategies
You will be surpris to learn that some of these products use cheap ingredients in the name of saving money. How do they save money? They skimp on quality so their price point can go down. Just take a look at the recently reported lawsuit against Paul Newman’s Own for using cheap garlic in its pasta sauces instead of real Italian garlic! In order to cut costs, companies will add fillers that add no nutritional value but just add weight by volume.
My most recent experience with this approach was with a prospective client. “We want to pay you the minimum possible amount and then we will see how it goes”. I said bye. Bye, bye!
I would never be able to advise anybody in such a way. It’s your responsibility as a consultant to find ways how both of us can make money from this project. Otherwise don’t take on such projects at all. You shouldn’t expect air traffic controller salaries for driving trucks through the countryside, right?
The Pythian Group is not alone with its views – here is what Timo Elliott. Founder and CEO of Solid IT GmbH, has to say:
For example, customers that do their annual budgeting based on maximum x percent price increase . Or customers that want to negotiate the final price (see blog entry ” The Price is Right ” ). Or customers that want to build their own tools. Around your products (to be able to sell it next year at double the price) instead of using something off-the-shelf. These are not consulting projects.