A firm produces highly substitute goods can adopt which pricing strategies
Answers
Substitute goods:
These are goods or products which act as a substitute in place of another similar product. For example, butter and margarine, or Pepsi and Coke.
There are multiple pricing strategies which may be used for the selling of substitute goods. Like the use of penetration pricing, economic pricing or psychological pricing. However, the most effective one is the penetration pricing strategy.
In this pricing strategy the price is lower, to attract customers. At least initially. Since your the seller of substitute goods, then if your product is less than the demanded good, customers will get attracted to you. Example, Coke and Pepsi taste the same, so I'm your not a brand loyal customer then its easy to reduce price of Pepsi and make you shift your demand from Coke to Pepsi.
A firm produces highly substitute goods can adopt going rate pricing strategies
Explanation:
- Pricing is an important decision of the management and most of the companies do not encounter it on regular basis but they need to follow certain guidelines in the pricing of the products.
- The going rate pricing for a company sets the price of their product or service based on the market price. This form of pricing strategy is normally used for pricing the similar products, or the substitute commodities or that have little variation in regards to their functions and design.
- The products are normally priced according to the prices that are present in the markets according to the prevailing competitive products.
To know more about Pricing strategy
Difference between pricing approach and pricing strategy
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