Low Price Strategy

Posted in Marketing and Strategy Terms, Total Reads: 423

Definition: Low Price Strategy

Low Price Strategy is a pricing strategy in which a product is sold at at lower prices than normal to attract customers. In simple words, the company is offered the product for cheaper prices so that people notice and buy it in comparison to may be the competitors products. 

Many small businesses think that having the lowest price in the market will make the business successful but the customers may also perceive the products to be of less quality if the prices are low.

To see whether low cost strategy is good for your company, look at market demand and carefully consider three factors:

1. Competitive Situation: Look at your competitors’ product offering and pricing. Also, if they offer any value-added services?

2. Determine Your Ceiling Price: Find out the ceiling price i.e. the highest price the market is willing to pay for your products/services.

3. Understanding Price Elasticity : If the demand for your product or service is less elastic, then you can put a higher ceiling on your prices.

For example- Xiaomi mobile phones are priced less than most competitors and offers all latest features. Still some tech-savvy customers are apprehensive about its quality because of such low prices.


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