Demand Oriented Pricing

Published by MBA Skool Team, Last Updated: January 22, 2018

What is Demand Oriented Pricing?

Demand oriented pricing as the name suggests uses the customer demand to set up the price in the market. We first determine the customer’s willingness to pay for any good or service. A high price is charged when the demand is high and a low price is charged when the demand is low. In case of service, high price is maintained during the peak hours and vice-versa.


The factors responsible for demand based pricing are:

• Cost of production

• Competition

• Product quality

• Market condition


Some of the methods used for demand based pricing are:

• Price skimming: The product is initially at a high price and slowly the cost decreases. Initially the highest price which the consumers are willing to pay are charged.

• Odd even pricing: pricing which normally ends like 99.99. Perceived to be cheaper by the consumer than 100. This prices of 99.99 have a greater psychological impact of cost effectiveness.

• Penetration pricing-Compared to the competitors the price is reduced. This allows for more customer penetration

• Prestige pricing- The quality is determined by the price

• Price bundling-Offer a product or service together with the main product for a total special price

 

This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.

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