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Benefits of Pricing Strategies

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Penetration Pricing: The strategy of setting a product’s price relatively low in order to generate a high sales volume. The strategy is commonly associated with the pricing of new products that do not have identifiable price-market segments. It is used to secure the rapid penetration of a market. This is the strategic use of many Chinese companies. It priced its products very much than its Western counterparts and it is making headway for a quite number of computer products.
Profit Maximization – In economics, profit maximization is the process by which a firm determines the price and output level that returns the greatest profit. Hence, based on the above concept. The strategy requires the price combinations that would yield the highest profit. Hence, a company can use this to have higher profits.

Directly or indirectly this is used by many food businesses like Jollibee food chains. If one enters an outlet one would observe packaging their meals into different combinations of food items. Such a strategy is profit maximization.
Competitor indexing. It is a price-setting technique used by marketers. Generally, it involves using the price of competitors’ products in determining the price of your own products. Its main advantage is ease of use. Extensive marketing research and statistical analysis are not required &lt.http://en.wikipedia.org/wiki/Competitor_indexing &gt. 5. Target rate of return pricing- It is a pricing method used almost exclusively by market leaders or monopolists. You start with a rate of return objective, like 5% of invested capital, or 10% of sales revenue. Then you arrange your price structure so as to achieve these target rates of return. This would help the company to meet its corporate profit targets. This is used by utility companies since the government allows them a maximum return on investment base.