Reference Pricing
This article covers meaning & overview of Reference Pricing from marketing perspective.
What is Reference Pricing?
Reference price is the price that a consumer considers justified to pay for a product/service in comparison to competitor products or in comparison to the previously advertised price of the same product/service.
1. Reference price can be a strategy where a firm sets its price in reference to its competitors- just below the competitor price. The competitor price will serve as a reference price for the customers and the lower price of your product will appear as a better deal. This way the firm will be able to tap the price sensitive customers if the product is similar.
Example: Competitor price is 55 Rs for a pack of coil and you launch the product with Rs 55 crossed and price written as Rs 50 with a message save Rs 5, introductory offer
2. Many firms also follows the strategy of keeping high prices initially and later offering high discounts. By keeping high price initially customers have a high refernce price and when they see a high discount based on the high base price, they have a notion that it is a very great deal. This lead to increase in sales.
Example: A store launches new clothes range for fall and after a week or two offers 50% discount on them
Hence, this concludes the definition of Reference Pricing along with its overview.
Browse the definition and meaning of more similar terms. The Management Dictionary covers over 1800 business concepts from 5 categories.
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