Business organizations compete with each other using pricing as well as non-pricing strategies. There are several factors that determine the pricing strategies. These strategies either use data related to profit and cost of the products and services or the data related to the amount spent on advertising and promotional activities. Mostly it is the nature of a business that determines the pricing strategies.
In the case of business where there is no monopoly non pricing strategies work better than visible pricing strategies. In the case of small business organizations it is easy to manipulate the pricing without much competition. In the case of markets where there is higher competition price of the product is established by the demand and variation in prices can be done for short term goals. Depending upon the need of the hour companies employ both pricing as well as non pricing strategies.
The factors that affect the pricing strategies vary based on the nature of a business, competition for existing products, demand from consumers etc. Common pricing strategies used by organizations generally include membership pricing, penetration pricing and discount pricing. In the case of membership pricing, the cost of the service or product is reduced for regular clients. In the case of penetration pricing, the cost of the product is lowered in order to attract the consumers which are usual buyers of competitors products. Penetration pricing is done as a temporary strategy due to the lower level of profit.