Price quality strategies for new product

                     Price is the value that is put to a product / service and is the result of a complex set of calculations , research and undertaking and risk taking ability. A pricing strategy takes in to account segments , market conditions , competitors action , trade margins and input costs , amongst others. It is targeted at the defined customers and against competitors.

        There are 4 quality strategies for new products:

1. Premium strategy

2. good value strategy

3. Overcharging strategy

4. Economy strategy

1.Premium Strategy :  A premium pricing strategy involves setting the price of a product higher than similar products. This strategy is sometimes also called skim pricing because it is an attempt to "skim the cream" off the top of the market. (EX: APPLE IPHONE.)  It is used to maximize profit in which there are  no substitutes for the product , where there are barriers to entering the market / when the seller cannot save on costs by producing at a high volume.

            Premium pricing can also be used to improve brand identity in a particular market. This is called price - quality signaling .Because the high price signals to consumers that the product is high in quality. Some companies use this strategy to give their product an aspirational image.

          Premium pricing is not generally used when there is direct competition for a product. Competition tends to under cut prices and leads to poor sales. For this reasons, premium pricing is often a short term strategy. The longer a company can keep  its competitive advantage ,  the longer it can charge premium price. Many products starts out a premium price , but the price is cut once competitors appear on the market.

2. Good value strategy :   Good value strategies are " offering the right combination of quality and good service at a fair price". A type of good value pricing for retail stores is every day low pricing .With this pricing strategy, stores charge a constant price with very minimal / no temporary price discounts. Other stores, such as Walmart and Safeway(USA) , have also adopted this pricing strategy, which is in contrast to high-low pricing, in which retailers charge higher prices on a daily basis, but also has promotions and discounts.

3. Overcharging strategy : Overcharging pricing strategy ( product :medium / price: high) with overcharging , the company overprices its product in relation to its quality. In the long run , customers will likely feel "taken", complain to others about it ,and will stop buying the product. This strategy should be avoided. EX: Maruti Suzuki versa 

4. Economy strategy : Economy pricing is a method of pricing in which a low price is assigned to a product with decreased production costs. An example of economy pricing is generic food sold at grocery stores. The generic items are priced lower due to the fact that they require very little marketing and promotion expenses.