Quick questions on Marketing strategies: product and price (HSC Business Studies)

Market segmentation divides the total market into groups that respond similarly to marketing. Segmentation precedes targeting (choosing which segments to serve) and positioning (deciding how to be perceived in those segments).

The three pricing methods describe how the price is determined.

The four NESA-named strategies describe how the price changes over time or how it sits relative to a benchmark.

Price = cost + margin. Common in commodity industries. Predictable but ignores customer value and competitor positioning.

Price set by what the market will bear, based on customer-perceived value. Common in differentiated and luxury markets. Apple Australia uses market-based pricing on iPhones.

Price set with reference to competitor pricing. Common in price-transparent markets (supermarkets, fuel, airlines, banking products). Coles and Woolworths set basket prices competition-based.

High initial price, gradually reduced. Used for differentiated products with price-insensitive early adopters (Apple iPhone). The maths:

Low initial price to win share fast. Used in price-sensitive markets and where network effects matter. Kogan, Stan launching against Netflix.

Selling one product below cost to draw customers in and sell them other (profitable) products. Coles and Woolworths regularly run milk or bread at loss-leader prices to drive footfall. The basket-level margin is positive even if the individual SKU is below cost.

Setting prices at specific psychological thresholds (e.g. $9.99,$19.95, $49.99) rather than round numbers. The 99-cent ending is a near-universal Australian retail convention.