Economy Pricing: Definition, Example, Advantages, and Disadvantages

We’ve always heard the word “Economy” in several different ways in our daily life. Sometimes the economy pricing is used for the country, and sometimes it’s used for domestic or international purposes.

If a company or a brand launches its product and sells it for a meager price with minimum margin compared to its competitors, this is termed economy pricing.

Economic pricing is a critical matter, and it needs to be studied and planned before implementation. We’ve compiled the most valuable facts about economic pricing for you. So to get a better understanding of this term, read this blog!

What is Economy Pricing?

Economy pricing is a unique pricing strategy that is used for running all types of businesses. In economy pricing, a company sells its products for a meager price and only generates the revenue based on the customer purchases or product sales.

Economy pricing is a perfect fit for goods that don’t require any marketing or advertising because these products will not require extra costs.

Example of Economy Pricing:

A lot of people think that economic pricing can be implemented on all types of products. But this is not what happens. Economy pricing can be implemented on a few specific category products.

Grocery items and medicines are two of the most common goods that are based on economy pricing. Some of the most common examples of economy pricing can be overseen in the following categories:

  • Budget airlines
  • Supermarket stores
  • Big box stores
  • Medical Drugs and Medicines

Budget airlines

Economy pricing is less predominant in the SaaS markets, yet there have been instances of subscription eCommerce organizations flourishing with economy pricing strategy.

Numerous aircraft set up their strategy to give economy pricing to fill seats in their planes within a short period, offering too low costs at the beginning and increasing the cost as the availability of the seat decreases.

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Supermarket stores:

Supermarket stores and marts represent a wide range of products of different brands. A lot of grocery stores use the economy pricing strategy to drive growth to their businesses. This helps them increase their revenue with time.

Medical Drugs & Medicines:

Like the supermarket store or grocery marts, pharmacy stores or medications use the economy pricing to drive more patients and increase their revenue growth.

Big box stores

Organizations like Costco take the economy pricing model to a higher level by selling their brands principally. While name brands are accessible, the significant disadvantage of such stores is the quality-to-value proportion of their conventional brands.

Advantages and Disadvantages of Economy Pricing

There are a lot of advantages and disadvantages of economy pricing. It is sometimes helpful to use and implement this pricing strategy, but on the other hand, there are some demetrics as well.

Let’s take a deeper look into both metrics and demetrics of economy pricing:

 Advantages of Economy Pricing: 

Three of the most renowned benefits of economy pricing are:

  1. It helps in increasing the current market share of the company. If the company decreases its marketing/advertising costs and reduces the overhead cost, it will still have a significant profit. This means economy pricing helps in gaining profit regardless of the investing costs.
  1. Companies can survive during economy lockdown with the help of economy pricing. With the slowdown in economic activity for a particular period, companies try to save money as much as they can. During this time, companies don’t pay attention to the quality of their products. Instead, they focus on keeping more. So, if you use economy pricing, you can even generate profit on your products by maintaining their quality.
  1. Economy pricing helps in covering the fixed cost. The organization will confront huge losses on the off chance that they stop the activity. It is primarily fixed cost. So it is smarter to deliver mass items at a low value to cover some piece of the fixed cost. The organization might, in any case, be making a loss. In such case, it is better compared to stopping the activity. 
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Disadvantages of Economy Pricing:

There are five main disadvantages of economy pricing, and they are:

  1. Customers will have less trust built upon your product without marketing and advertising. In economy pricing, companies cut down their marketing and advertising costs. Without proper marketing and advertising, your product will not appear in front of the right audience. In this way, there are chances that your competitor’s product can overtake your audience.
  1. Economy pricing may lead to low-quality products creation. In economy pricing, the company needs to reduce its overhead costs. When a company reduces its costs, it’ll need to go for low-quality equipment and hire staff that can charge less. So, this can affect the quality of the production.
  1. Economy pricing puts a company at a higher risk. If a company does not move with the proper economy pricing and tries to make slight changes, it can face severe problems. This can increase 70% chances of failure. So, not following the exact strategy might put a company in danger.
  1. A company cannot grow its business vigorously with economy pricing. It just functions admirably for smaller companies. You can’t keep a low cost in the event that you sell your item in various business sectors or locales. The competitor continuously searches for new ideas and will find a way sooner or later to defeat you in terms of pricing.
  1. Economy pricing also increases the competition in the current market. Once new startups see your company progressing, they’ll try to copy you. They can come up with an identical product within their brand and sell it at a lower price to attract your audience towards their development.
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According to the metrics mentioned above and demetrics of economy pricing, we will recommend you the following:

If you’re running a SaaS company, it is not recommended to go with economy pricing. You can face a lot of problems.

However, if you’re operating in a budget-friendly market where buyers and your product do not require a lot of investment, you can go with economy pricing.

Furthermore, suppose you don’t have a crystal clear economy pricing plan. In that case, we will recommend you to AVOID GOING WITH ECONOMY PRICING STRATEGY because this can put your company and business at a greater risk.

Conclusion:

Economy pricing is a pricing strategy used to reduce overhead costs and run your business at a lower price. Selling your products at a lower rate within minimum profit margin is the economy pricing strategy. It has benefits and disadvantages as well. However, there are certain situations through which a person can decide whether to go with this strategy or not? We’ve discussed every aspect of economy pricing in this blog to help you get a better idea of economy pricing.

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