Advantages and Disadvantages of Pricing Strategies. An example of price skimming would be mobiles which have some Explain the advantages and disadvantages of using premium pricing as a strategy. Disadvantages: Premium pricing strategies are difficult to initiate and maintain. Here are the advantages and disadvantages of a promotional pricing strategy to consider. Understanding Price Skimming. Latika B answered on March 17, 2015. by Roslyn Frenz from Demand Media. Price skimming is a pricing strategy that companies adopt when they launch a new product, in this strategy while launching a product company sets a high price for a product initially and then reduce the price as time passes by so as to recover the cost of a product quickly. 1. Premium pricing will naturally result in higher profit margins for your company, if successful. Smaller companies have to be competitive, but they cannot beat larger companies on price long-term without sacrificing quality. 4.5 Ratings, (9 Votes) Answer: Premium pricing can be described as an approach of practicing in which price higher than market price is set. This type of strategy increases a consumer’s value perception. Premium pricing benefits are largely self-explanatory—done right, the strategy can lead to higher profit margins and improved public perceptions of your company. The marketing mix determines the marketing elements related to selling a product. Market limitation: the high price point of your products will only attract certain customers, this means your overall market penetration may be limited. Unit and branding costs will likely be high, while sales volumes will be low. How to price a product A premium price tag can help to enhance your brand identity , and adds to the aspirational quality of your product. Cost based pricing works well for larger companies, as they can better withstand the race to the bottom. Price Skimming aims at reaching a segment of the market which is relatively price insensitive. It’s basic math—a higher price-per-unit leads to higher profit-per-unit sold. Cost-plus pricing is a common approach to pricing used by many B2B/B2C businesses, probably because it's easy to calculate and implement: in order to reach your cost-plus price you simply add up all the costs of production or manufacture, set a desired margin for each unit and add that margin onto your cost. When customers go shopping, they are balancing the need they have for specific items with the cost of obtaining that item. Branding cost: a premium pricing strategy is driven by a strong brand and proposition — something that takes time, skill and money to build. Premium Pricing. Disadvantages. Premium pricing is reserved for 5-star hotels, first-class airline tickets, and other products that give the … Advantages and Disadvantages of Competitive Pricing Strategy Marketing mix factors include the product itself, promotion, placement and price. 1 Approved Answer. List of the Advantages of a Promotional Pricing Strategy. Premium pricing is used for products or services that are clearly of a higher luxury value than anything else on the market. Under this pricing strategy, the export firm fixes a very high price for its product.The firm sells its product at a high price in the segment of the market which is willing to pay a premium price for the value received. The disadvantage in cost based pricing for services is that it punishes efficiency. Mar 20 2012 06:59 PM. Pricing for services is that it punishes efficiency, placement and price they! Leads to higher profit margins and improved public perceptions of your company, if successful relatively price.. 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