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Types of pricing strategies
Choosing the right pricing strategy is essential for a business to be profitable. competitive, and successful in the long run
Businesses usually focus on one of two options
High profit margin, lower volume pricing strategy e.g. M&S food
price skimming strategy - selling price is initially set as high as possible and then gradually lowered over a period of time. Mostly used when companies have a strongly established brand identity
Lower profit margin, higher volume strategy e.g. Tesco
penetration pricing strategy - business sets a low price for a new product/service when it’s first introduced. Once they have enough customers, the business will start to raise the price
A business may opt for high prices with low sales volume or low prices with high sales volume
Freemium models
A pricing strategy which uses a free version of the product to promote a premium version. The free version often allows uses to see advanced features but not access them unless the pay
It’s important a business chooses a pricing strategy that…
reflects the brand and quality of the product/service; choosing the wrong strategy can reduce the potential level of profitability
