Pricing strategies

What does price refer to?

The amount of money charged for a product or service.

What must be considered when setting a price?

• Costs of production.

• Demand for product.

• Target demographic - income.

• Branding may add value.

What can businesses adopt?

A number of pricing strategies.

What is penetration pricing?

When a product is sold at a low introductory price.

Price can be increased once customers trust the brand/product and are likely to repeat purchase.

What does penetration pricing aim to do?

• gain market share quickly.

• build customer usage and loyalty.

• build sales of high-priced related items (hook and bait approach).

What is price skimming?

• Set a high initial price to maximise profits.

• Product is sold to different market segments at different times.

What is the aim of price skimming?

It targets a certain demographic with its higher price. Other segments can be targeted later once price is lower.

What is competitor pricing?

• Pricing based on prices charged by competitors.

• Aim is to price similarly or slightly lower than competitors.

• Helps attract customers in highly competitive markets.

What is Cost Plus Pricing?

• Calculating selling price based on cost of producing plus desired profit.

• e.g. if a product costs £10 to produce and they want to make 20% profit - £12.

What does cost plus pricing help to do?

Helps guarantee profit as selling price will definitely cover costs.

This can adapt and change mark-up/profit margin to remain competitive.