SCENARIO: You're introducing a new product into a crowded market. The customer does not understand this product's internals, nor is it easy to compare features. You have no marketing budget, but can package your product to match any pricing strategy you choose. Your goal is to establish your brand in the market and build a loyal customer base.
Weirdly, the correct answer is STRATEGY #4, according to most research studies. A recent article on pricing in the New York Times explained that:
If you give people a placebo and tell them it's a painkiller costing $2.50, they can withstand painful shocks better than if they're told the pill costs a dime. Give them an energy drink at a discount price, and they'll perform worse on subsequent tests than if they pay full price. If you tell them the wine they're tasting costs $90 a bottle, then the reward centers of their brains will light up more than if you tell them it's a $10 bottle.The article goes on to cite studies showing that a marginal price increase (STRATEGY #3) often doesn't work at all. STRATEGY #2 is a loser unless your packaging is VERY creative, while STRATEGY #1 might work if your packaging successfully positions your product as a viable alternative to the existing brands.
READERS: Care to argue the point?