This strategy delivers results in the following situations:
i) When the size of the market is large and it is a growing market.
ii) When customer loyalty is not high customers have been buying the existing brands more because of habit rather than any specific preferences for it.
iii) When the market is characterized by intensive competition.
iv) When the firm uses it as an entry strategy.
v) Where price-quality association is weak.
3) Differential Pricing Strategies: this strategy involves a firm differentiating its price across different market segments. The assumption in this strategy is that different market segments do not communicate or have different search costs and value perceptions of the product. In other words heterogeneity in the market motivates a firm to adopt this strategy.
4) Geographic Pricing Strategies: this strategy seeks to exploit economies of scale by pricing the product below the competitor’s in one market and adopting a penetration strategy in the other. The former is termed as second market discounting. This second market discounting is a part of the differential pricing strategy where the firm either dumps or sells below its cost in the market to utilize its existing surplus capacity. So, in geographic pricing strategy, a firm may charge a premium in one market, penetration price in another market and a discounted price in the third.
5) Product Line Pricing Strategies: these are a set of price strategies, which a multi-product firm can usefully adopt. An important fact to be noted is that these products have to be related, in other words belonging to the same product family. Faced with multi-products and fluctuating demand, the firm may adopt a combination of the following strategies to effectively manage its product line or maximize its profits across the product line.
i) Price Bundling: this strategy is used by a firm to even out the demand for its product. This is useful strategy for perishable; time-bound products like food, hotel room or a seat on a flight and for products cannot be substituted, like the package of stereo music system. Off-season discounts and, season tickets for music festivals are examples of price bundling strategy. This is a passive strategy aimed at correctly bundling the prices of related items so that the firm is able to maximize its profits.