A product’s price can be set by the following methods, which are: cost-based method, competition-based method, or demand-based method. Cost-based pricing method is setting the price based on the cost of offering or making that product. This is also the method that gets the least impact from social media. Chipotle products are priced by the competition-based pricing because the price is set differently at different locations, in relation to the competition there. I also learned the four different strategies for pricing: economic, price skimming, penetration pricing, and premium pricing. Apple iPhone is a perfect example of price skimming, because they would set the price very high when it first released, then it will lowers the price afterwards. For instance, if this new iPhone costs $1,000 right now, it may be $800 next year.
Furthermore, I learned about the pricing issues with social media. One of them is surge pricing. If there is a very high demand of riders in need of drivers, then Uber increases its normal price, because there not enough drivers. If the price is set as how people expect in their minds, then it would be the reference price. Reference price reminds me of the activity that my professor did earlier this month, which we had to guess the typical price of the shoes that was shown on the board. First, it was an ordinary pair of flats. Then it was a pair of fancy shoes. Everyone had different opinions and the actual price of that pair of fancy shoes went beyond our imagination. Coupons are the most common way of sales promotion. It gives customer incentives to shop when there are coupon offers.
