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pricing strategies
mthods used by a business when deciding what to charge for its products
uses of pricing strategies
achieve marketing and corporate objectives
increase market share
effectively compete in the market
cost plus pricing
add a percentage to the costs of producing a product to get the price
advantages of cost plus pricing as a pricing strategy cost-plus
ensures all costs are covered
easy to calculate
economically sustainable
disadvantages of cost plus pricing as a pricing strategy
ignores market conditions
different prices to their competitors
hard to identify all the costs associated
equation for calculating cost plus pricing
price = unit cost + mark up
price skimming/creaming
setting a high price initially and then lowering it later
advantages of price skimming as a pricing strategy
generate high levels of revenue
helps cover cost of market research
makes the product seem prestigous
establishes a new product
disadvantages of price skimming as a pricing strategy
doesnt work in markets with large amounts of competition
price needs to be justified
high prices can deter consumers
works for inelastic demand only
penetration pricing
setting a low price when lanching a products to get the product established in the market
advantages of penetration pricing as a pricing strategy
succesfull with products aimed at lower socioeconomic groups
increases the quanitity of sales
fast growth
allows them to exploit economies of scale
disadvantages of penetration pricing as a pricing strategy
high risk
unrealistic price expectations
does not garantee customer loyalty
product seems low quality
predatory pricing
setting a very low price when launching a products to establish it and make rivals exit a market
features of predatory pricing
illegal in some countries as it causes a lack of competition in the market
gets rivals to leave the market
advantages of predatory pricing as a pricing strategy
eliminates competition
restricts entry of new competition
customer pay lower prices for products
Disadvantages of predatory pricing as a pricing strategy
low profit margins
considered illegal
sudden price decrease drives out competition
competitive pricing
a pricing strategy based on the prices of the competitors so the prices are set simalarly to their competitors
advantages of competitive pricing as a pricing strategy
low risk / safe
allows price leadership
cost effective
Disadvantages of competitive pricing as a pricing strategy
can be inaccurate
not all customers are willing to pay
opportunity cost loss
psychological pricing
setting a price slightly below a round figure to make it appear cheaper than it actually is
advantages of psychological pricing as a pricing strategy
discourages pricing
grabs attention
increases profit and revenue
Disadvantages of competitive pricing as a pricing strategy
affect brand reputation
no garantee of success
factors affecting the choice of pricing strategies
differentiation in usp
price elasticity of demand
amount of competitors in the market
strength of the brand
stage in the PLC
costs required to mke a profit
why does the differentiation of usp matter when choosing the pricing strategies
a strong USP leads to using price skimming
why does the price elasticity of demand matter when choosing the pricing strategies
leads to becoming a price leader and likely to use competitive pricing
why does the the amount of competition in the market matter when choosing the pricing strategies
high amounds of competition leads to predatory pricing or competitive pricing
why does strength of the brand matter when choosing the pricing strategies
a stronger brand can lead to price skimming
why does the stage in the PLC matter when choosing the pricing strategies
introduction: penetration
growth: using the same pricing streategy
maturity: psychological
decline: competitive/penetration
why do the costs required to make a profit matter when choosing the pricing strategies
because of the uncertainty in the market, high costs leads to costplus pricing
ways social trends replect changes in pricing
online sales
dynamic pricing
auction sites
price comparison sits
personlised pricing
subscription pricing
social trend: online sales
more businesses needs to adapt to online sales otherwise they wont be able to compete effectively in the market
social trend: dynamic pricing
changing the pricce based on external factors to maximise revenue
social trend: auction sites
offfers the best possible price however they requires a fee
create a sense of urgencu/ importance
trend: price comparison sites
retailers need to adjust their prices to remain competitive to reflect the rise in price comparison
used by a business to prevent losin customers
used to adjust prices automatically
social trend: personalised pricing
use of data relating to a specific online shooper to set a unique price for that shooper
can be enhanced by using third party cookies
social trend: subscription pricing
charging a regukar monthly fee to use a service or provide access to a specific product range
