Using Kotler’s Pricing model to review positioning

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Also referred to as the nine quality-pricing strategies, since it is a matrix covering nine options, the aim of Kotler’s Pricing model is to help companies position their products or services relative to competitors as perceived by the market, and consider their pricing strategy accordingly.

You can use the Price – Quality Strategy Model to review competitors’ products and services and review their strategies. Why do they charge more? Why do they charge less? Sometimes if aspects of a service are removed, this can contribute to lower prices.

What are the 9 Pricing strategies?

The nine pricing strategies are shown below, relating price against quality.

pricequalitystrategymodel

Our summary below reviews the most frequently used strategies based on the different objectives:

  • 1. Maximum current profit objective

A Premium strategy (top-left) is used for this objective. Typically, there are few competitors and a strong brand driving demand, so a higher price can be set.

  • 2. Product Quality Leadership objective

This is the High value strategy, where a higher quality product is provided and more expensive components are used.

  • 3. Survival objective

This is ‘Buying work’ or dropping the price to gain market share. It is a Good Value or Economy strategy. Often used when customers’ needs change or when competitors move into a market.

  • 4. Maximum sales growth objective

This is a similar low price strategy involving setting a low initial price to capture market share initially, then when the market grows and costs decrease, costs are reduced further.

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