Tactical Pricing

Posted in Marketing and Strategy Terms, Total Reads: 825

Definition: Tactical Pricing

It is varying the price for the product for a short period of time aimed at upsetting competition or accessing market entry.

Generally pricing has multiple levels of implementation. At the highest level is strategic pricing, which is about long-term profit objectives of the organization. The middle layer is tactical pricing, which adjusts price to take into account short-term market dynamics that sees demand shifts and competition. The lowest layer is execution level, where the implementation is based on different SKUs of the product, the inventory level and supply management of the SKUs.

One can optimize Tactical pricing from the output of simple regression models which ignores the reaction from competitive firms for pricing changes, because in the short term the impact of these changes may be very little and in the long term it will affect the firm following the strategy.

Tactical pricing may involve one or more of the strategies like temporary price cutting or another financially motivated sales strategy to help increase sales of the product and gain new customers in the short term. The strategy cannot be used for long term. It is easy to copy too.

Different tactical pricing strategies can be used for products in different stages of the product life cycle.



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