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The law of demand states that the quantity of a product demanded decreases when the price of that product increases. So when the BMW manufacturer raised the price of their cars over a two-year period, sales should have dropped off. Right?

Not exactly. This strategy helped incredibly for BMW sales in South Africa. To keep sales from slipping BMW actually raised the prices in an effort to take on a more upmarket image.

A growing number of middle-price brands are under attack from competing products in both the luxury and the discount markets. Customers are moving away from middle-of-the road products in favour of premium products or those offering the lowest prices. The inexpensive supermarket label brands are thriving as is the exclusive ranged products, leaving the average (price and product)to fall by the wayside due to a shift in consumer buying habits. These days, choosing the right price is even more important than it was in the past. Although much has been written on the science of pricing products, the fact is that in many cases, pricing remains an art. Of course, production cost figures influence a products price, but many other less tangible, less measurable factors also influence a pricing decision. Lower prices are preferred for most products, but there are exceptions. The higher you price certain products like Mercedes Benz, the more desirable they become.

Most customers associate high quality with high prices. Image plays an important role in setting prices. For example, the ingredients of a bottle of perfume retailing for $200 may only cost $50, the the $200 price tag creates an air of mystique and sophistication. "Women are buying atmosphere, hope, and the feeling of something special," says a major perfume manufacturer. Customers consider more than price alone when making decisions. Quality, reliability, service support, ease of operation and other intangibles rank high on customers' list of buying criteria.

Penetration pricing strategies involves gaining quick acceptance and extensive distribution in the market. The entrepreneur introduces the product at a low price. The low profit margins may discourage other competitors from entering the market with similar products.

Skimming pricing strategies involves setting the price well above the total unit cost and to promote the product heavily in order to appeal to the segment of the market that is not sensitive to price. Such a pricing tactic often reinforces the unique, prestigious image of a shop and projects a quality picture of the product.

Sliding-down-the-demand-curve pricing strategies involves the entrepreneur introducing a product at a high price till technological advancements enable the firm to lower its costs and to reduce the products price sooner than its competitors.

Other pricing strategies involve.

ODD PRICING, $12,95 instead of $13,00

PRICE LINING, each category of merchandise contains items that are similar in appearance, quality, cost and performance. Music shops generally use this technique by placing CD's etc in the same price line.

LEADER PRICING, products are marked down from what consumers are accustomed to paying in an attempt to attract more buyers, they earn smaller profits in the hope to attract more customers.

OPPORTUNISTIC PRICING, when products or services are in short supply customers are willing to pay more.

DISCOUNTS, products are marked down to move stale, outdated, damaged or slow moving products.

Pricing, is it an art or a science?. Well the only way to really know is to study and understand your products and your market segment. The right price today may be completely inappropriate tomorrow because of changing market conditions