Pricing is a very powerful weapon in marketing, but there are many different ways to use it to help achieve marketing objectives. It is important to make a distinction between pricing strategies and pricing tactics.
These are adopted over the medium to long term to achieve marketing objectives They have a significant impact on marketing strategy.
These are adopted in the short run to suit particular situations.
Tactics have only limited impact beyond short-term sales of the product itself. It may also be that the pricing strategies a business can implement are constrained by the competitive position of the business.
It is often said that there are four categories of position a business can find itself in which influence the control it has over pricing:
Price takers - A business has no option but to charge the ruling market price
Price makers - The business has a strong enough competitive position to be able to fix its own price – either higher or lower than the competition
Price leaders - Market leaders whose market share is so strong that its price changes are closely followed (and often copied) by rivals
Price followers - A business that just follows the price-changing lead of the market leader (ignoring the rest of the competition)