Posted in Marketing and Strategy Terms, Total Reads: 1087
Definition: Preemptive Pricing
Price is nothing but the money charged for any product offered or service rendered. Different strategies are used to set the price of products. All these fall under the umbrella of marketing strategies.
Pre-emptive pricing is a technique of selling products at below normal/market prices for a short span of time to attract more customers and combat the competitors and discourage potential entrants from entering the market. It helps a company to raise its market share. Once it becomes a market leader, it raises its prices to a profitable level. It is profitable in markets which have fewer barriers to entry and should not be confused with predatory pricing.
The conditions for selecting this pricing strategy are:
a) One should hold a strong position in a small to medium market.
b) There should be sufficient coverage of the market and considerable customer loyalty to discourage and combat competitors.
This method of pricing requires close contact with the field i.e. paying close attention to customers, competitors, market conditions, economic conditions, etc. which could influence the decisions for pricing a particular product. This strategy depends a lot on the timing as well. It’s like “hit the rod with the hammer when it is red hot”, the brand should strategize accordingly considering all the affecting & affected factors.
Example: Apple at one point of time adopted pre-emptive pricing as their strategy to raise the market share. There were price cuts on iPod shuffle, MacBook and other variants. This helped a lot as far is discouraging potential entrants in the market is considered.