The important differences between passive and aggressive methods of pricing are the different company’s image the retailer choose to convey to consumers. According to the text book, Passive Pricing is “based on a retailer’s differential advantage rather than on beating competitors’ prices” while Aggressive Pricing is “based on undercutting competitors’ prices rather than concentrating on the company’s strengths.” These two methods are opposite to each other that should be applied accordingly due to the structure of the retailer.
Passive pricing methods include skimming, differential pricing, and blind-item pricing. It is normally used by companies that try to differentiate themselves from competitors on price. Retailers who want to develop a prestige image and set a high initial price on a product when there is little competition would use the skimming method. An example of this type of retailers is Apple Inc, which sell relatively high-priced products to consumers to generate sales. Differential pricing indicates that prices are set based on past sales history. Retailers that sells seasonal products would use this method to set up different prices to different consumers at different times. However, it is not applicable on fashion merchandise. Blind-item pricing method is used for products that are rare or not easily found in other stores. It means that prices are set at a price that is not tested in the market, but would be adjusted accordingly later on based on consumers’ reaction to it. Type of retailers using this method could be the ones who have private labeling products.
Aggressive pricing methods include penetration, experience curve pricing, and matching the competition. Penetration is the opposite method of skimming that the retailers set the price low at the beginning, because of the competitive environment and the desire of earning market share. Types of business use penetration could be supermarkets who tend to introduce new food products. Experience curve pricing is similar as differential pricing that both of them set the price accordingly throughout the time. However, experience curve pricing is normally used by major discount retailers and category killers who try to lower their price to generate sales while differential pricing adjusts the price up and down depends on the situation. Lastly, matching the competition is normally used by many online retailers who are in highly competitive environment that consumers compare prices on different retailers. Examples of these type of retailers are Best Buy, Walmart, and Target.