Pricing Strategies

Flashcards about pricing strategies

Cost-plus pricing

Setting a price for a product or service which covers the cost and gives a profit margin.

Price skimming

Setting a high price at the launch of a new product to recoup R&D costs.

Penetration pricing

Setting a low price at launch to encourage customers to try a product.

Predatory pricing

Oligopolies use low pricing to hold off new entrants.

Competitive pricing

Products or services priced in line with competitors.

Psychological pricing

Pricing products at £1.99 rather than £2.00 to appear cheaper.

Factors determining pricing strategy

Number of USPs/amount of differentiation, price elasticity of demand, level of competition, strength of brand, stage in the product life cycle, costs and the need to make a profit.

Why websites (online businesses) can offer lower prices than physical shops

They don’t have the overheads, rent and costs of running a store

Impact of price comparison sites

Customers are now able to shop around and use price comparison sites to compare prices