Promotional Pricing - Definition, Importance, Types & Example
What is Promotional Pricing?
Promotional Pricing is one of the most powerful sales promotion techniques in which the prices are reduced drastically for a short duration. It is also termed as On Sale pricing. It works as a pricing strategy that helps to increase the demand for the product.
Many companies use this strategy effectively to improve the bottom lines by increasing the sales in terms of volume and attracting more customers at a reduced price but optimizing the profits.
Types of Promotional Pricing
Various types of Promotional pricing are:
1. Basic Price Discount as a percentage
2. Buy one get one free
3. Bundled Products
4. Absolute Discount in currency
5. Cashbacks
6. Additional Duration Free on paying in advance
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Promotional Pricing Example
1. Buy one get one free is a good example of promotional pricing
2. Sale with 20% or 30% off etc.
Importance of Promotional Pricing
Promotional pricing is widely used both by manufacturers & retailers to gain market share & attract the customers to product, shop or a brand. Manufacturers use this technique to make customers aware of a particular product line or services or a particular brand. While for retailers, instead of a particular product or brand, the price discount is given on many products so as to get the consumer to buy a variety of things from the shop.
Promotional pricing is an informed decision by the company to give price discount on particular product or brand & calculations are done in order to assess the feasibility of discount & the time period for which it could be given. The rationale behind giving price discount is that any loss experienced would be compensated by the increase in sales volume and the addition of new loyal customers.
Some flaws are also associated with promotional pricing as consumers stock up the product during promotional period & pre pone their purchase so as to get benefit of the price promotion. The price promotion may affect the brand equity as well & hence should be decided wisely.
Hence, this concludes the definition of Promotional Pricing along with its overview.
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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