Setting Price

Step 4: Determine Promotional Pricing

The final price may be further adjusted through promotional pricing.  Unlike standard adjustments, which are often permanently part of a marketer’s pricing strategy and may include either a decrease or increase in price, promotional pricing is a temporary adjustment that only involves price reductions.  In most cases this means the marketer is selling the product at levels that significantly reduce the profit they make per unit sold. 

As one would expect, the main objective of promotional pricing is to stimulate product demand.  But as we noted back in the Sales Promotion Tutorial, marketers should be careful not to overuse promotional programs that temporarily reduce selling price.  If promotional pricing is used too frequently customers may become conditioned to anticipate the reduction.  This results in buyers withholding purchases until the product is again offered at a lower price.  Since promotional pricing often means the marketing organization is making very little profit off of each item sold, consistently selling at a low price could jeopardize the company’s ability to meet their financial objectives.

The options for promotional pricing include:

• Markdowns
• Loss Leaders
• Sales Promotions 
• Bundle Pricing
• Dynamic Pricing