- PRICING STRATEGY: PRICE SKIMMING!
- PRICING STRATEGY: GIVING YOUR PRODUCT/SERVICE FOR FREE
- SHOULD WE COMPARE OURSELVES?
- WHAT SHOULD WE MEASURE WHEN WE EVALUATE OUR MARKETING EFFORTS?
- WHAT IS THE VALUE OF A CUSTOMER?
- DOES CONTENT MARKETING WORK?
- WHAT IS THE DIFFERENCE BETWEEN A BRAND, BRANDING, A PERSONAL BRAND AND A COMPANY/PRODUCT NAME?
- WHAT IS GROWTH HACKING?
- HOW MANY « P » CAN BE FOUND IN THE MARKETING MIX?
- THE CUSTOMER VALUE CHAIN
- HOW CAN YOU PROTECT YOUR UNIQUE PRODUCT OR SERVICE?
- CONFERENCE ON FINANCING - MAY 2, 2017
- WHAT IS DRIP PRICING?
- WHICH AMOUNT SHOULD YOU CHOOSE FOR YOUR PRICES?
- DETERMINING YOUR HOURLY RATE BASED ON THE VALUE YOU THINK YOU HAVE
- IS LOWERING YOUR PRICES A GOOD IDEA?
- TO OFFER OR NOT TO OFFER FINANCING?
- HOW TO PROTECT YOURSELF AGAINST EXCHANGE RATE RISKS
- WHEN IS A GOOD TIME TO INCREASE YOUR PRICES?
- DEMAND BASED PRICING
- WHAT IS A LOSS LEADER?
- HOW TO ORGANIZE A DRAW THE RIGHT WAY?
- HOW TO HAVE REMOTE EMPLOYEES
- IS IT GOOD TO BE FIRST IN A MARKET?
- THE THREE TYPES OF CUSTOMERS
- EXPORTING TO MEXICO - QUERETARO REGION
- DEFINING BUSINESS SUCCESS
- ARE YOU USING REBATES? WATCH OUT FOR THESE
- IS THE CUSTOMER ALWAYS RIGHT?
- EXPORTS AND QUEBEC COMPANIES
- COWORKING SPACES
- YOUR PLACE OF BUSINESS AND INTERNET
- WHY IS SOCIAL MEDIA IMPORTANT FOR YOUR BUSINESS?
- HOW TO USE FREEBIES
- WHAT IS THE MAGICAL FORMULA FOR HAVING SUCCESS IN BUSINESS?
- DO YOU HAVE EXPERIENCE IN MY FIELD?
- WHEN CAN WE STOP OUR MARKETING?
- WHAT IS A CALL TO ACTION?
- WE ARE ALL SALESPEOPLE; HERE'S HOW TO GET THERE
- HOW CAN MARKETING AND SALES COLLABORATE?
- HOW TO SELL MORE TO YOUR EXISTING CLIENTS
- WHAT IS CROSS-MARKETING?
- WHY SHOULD I SEGMENT?
- WHO IS RESPONSIBLE FOR MANAGING YOUR COMPANY'S IMAGE?
- HOW TO CHARGE FOR YOUR PRODUCTS / SERVICES?
- HOW TO DEFINE YOUR PRICING STRATEGY: PRICE POSITIONING
- HOW TO DEFINE YOUR PRICING STRATEGY: MARKET PRICING
- WHAT PRICE SHOULD YOU SELL AT? - COST-BASED PRICING
- WHAT IS A PRODUCT?
- HOW TO MARKET YOUR NEW BUSINESS?
- IS BUYING A FRANCHISE A GOOD WAY TO START A BUSINESS?
- HOW SOCIAL MEDIA HAS CHANGED WORD-OF-MOUTH
- HOW SOCIAL MEDIA HAS CHANGED PUBLIC RELATIONS
- WHAT IS BRANDING?
- WHY INCREASING SALES IS NOT THE SOLUTION
- HOW TO SELECT YOUR COMPANY NAME?
- WHY HAVING A WEBSITE IS ONLY THE BEGINNING?
- WHAT IS MARKETING?
- HOW TO MAXIMIZE THE VALUE OF YOUR SOLE PROPRIETORSHIP BUSINESS
- WHY SELLING IN MEXICO?
- LOW COST MARKETING INITIATIVES
- WHY IS PRODUCT DIFFERENCIATION IMPORTANT?
- hOW TO PRESENT OUR COMPANY
- WHAT IS THE DIFFERENCE BETWEEN MARKETING AND PUBLICITY?
- 50% OF YOUR ADVERTISING BUDGET DOES NOT PRODUCE AS MUCH AS THE REST
- RIGHT SELL AND OVER DELIVER
DEMAND BASED PRICING
What is demand based pricing? It is a strategy that takes into account known periods of high demand and establishes prices accordingly to maximize sales over a given period.
It is perhaps easier to explain this commonly used strategy with examples.
For the first example, lets take the airline industry. A ticket from Montreal to Miami purchased in August will not be the same price as one bought in January. Why? The aircraft consumes the same amount of fuel, there are the same number of employees on board (pilots and flight attendants) and airports costs are comparable (the aircraft must be de-iced in Winter, but how much does that cost impact the ticket price?). In addition, a flight in August to Miami is much more likely to be partially filled than in January. If the cost based pricing strategy was used, then ticket prices in January should be lower (costs are split over a larger number of travelers). But the opposite is true. Why? Because of the demand. As a very large amount of people are limited with their vacation dates and that Miami is a vacation destination of choice, this creates more demands for the tickets hence the prices go up.
Another industry using the same pricing strategy and for the same reasons is the hotel industry. A room rented for the weekend will be more expensive than the same room rented during the week. A room rented last minute can be more expensive than one rented a few weeks in advance. Finally, if the hotel is in a tourist area, a rented room for Christmas/New Year will be more expensive than the same room for a week in let’s say October.
This is the same phenomenon that goes on when homeowners put up their house for sale on a sellers' market; the final selling price can often exceed the asking price because of overbidding. But here we are talking about the consequence of a favorable market, not a pricing strategy used by sellers.
Airlines and hotels industries are not the only ones using this strategy. What about the seasonal clothing industry? Shorts sold in spring will not be the same price as the same shorts sold at the end of summer. This is the same phenomenon at work; relying on supply and demand. There are more people who need shorts for the summer than people who will buy the same shorts at the end of the season. There is another element that is to be taken into account here: inventory management. It is more profitable for retail companies to give a discount and move an inventory stock that has not been sold than to keep it and occupy the space of the garment that will be sold at a high price in the next season. Of course consumers who understand this strategy, and have some flexibility, will buy the shorts at the end of the season at a discounted price for the up and coming season. Retail companies have less control over periods of high demand than the airline industry. That being said, they are trying to create this demand by offering seasonal "trends" that change from year to year. So if the shorts you buy off season are pastel and next year’s colors are bright, you may find yourself somewhat out of phase. Unless you are not too worried about fashion trends.
One last example: the products sold to your farmers’ market. If you get there early in the morning and the farmer is getting his goods out to start the day, the price will be a different price than in the evening when he must put the unsold products in his truck. Of course in the morning you have the choice of the finest products. But if you take tomatoes, the effect of supply and demand plays a bigger role in price variation than the appearance of the tomato.
The industries using this strategy are multiple. But for it to work, there must be a supply and demand effect and a certain resistance to competition. Depending on your niche, it is a pricing strategy that can be considered.
If you have any questions or comments, do not hesitate.
Stéphane Elmaleh-Riel, B.Ed., MBA