Pioneer Pricing versus Psychological Pricing
Jaap de Jonge, Management Consultant, Netherlands
In my view,
Pioneer pricing involves setting the (base) price for a new product. The base price can be set high to quickly recover development costs and can be used as a reference point for developing discount prices in various market segments.
In determining the pioneer base price, typical considerations include:
- How quickly competitors will enter the market
- How strong competitors will enter the market
- The effect their entry will have on the development of the demand
Psychological pricing encourages purchases based on emotional rather than rational responses. It is used most often at the retail level for B2C products. A typical example is a toothpaste for $0.99.