Business M 4.5 Pricing

Cost-plus pricing

adding a percentage or specific amount of profit to the cost per unit of ouptut

Loss leader pricing

setting the price of a good or service below its costs of production —> entice customers to buy it

Mark-up

refers to extra amount charged by a business on top of its unit costs of production to earn more profit margin

Penetration pricing

involves setting low prices in order to gain entry into a new market

Predatory Pricing

temporarily setting low prices so that competitors cannot compete at that level

Premium pricing

when the rpice of a good or service is much higher than similar competing products, usually because the product is of higher quality

price

vlaue of a good or service —> how much needs to be paid

Price wars

businesses competing by a series of continues intensive price cuts to threaten the competitiveness of rival firms.

Pricing methods

Are the various methods of setting the amount that customers pay fort certain goods and services

Dynamic pricing

Prices change depending on demand and other factors.

E.g.: Airline increases ticket prices when demand is high

COmpetitive pricing

business sets its price based on the prices charged by competitors

Contribution pricing

Price is set to cover variable costs and contribute towards fixed costs and profits

PED pricing

Price elasticity of demand to decide how a price change will affect demand and revenue.

If demand is price inelastic, a business may increase price because demand is likely to fall by a smaller percentage.

%change in quantity demanded divided by % change in price