IB Business Management SL - 4.4. Price

Cost-based pricing

Deciding on the price primarily based on the costs of production

Cost-plus pricing

Calculating the average cost of production and adding a mark-up for profit

Market-oriented pricing

Deciding on the price based on an analysis of the conditions in the market

Penetration pricing

Used by businesses trying to gain a foothold in the market. The idea is to lower the price to encourage customers to purchase in larger quantities.

Market skimming

Charging a high price for a new product for a limited time period to gain as much profit as possible while the product is unique in the market.

Loss leader

Products prices at low levels to attract customers, the company makes a loss on the product.

Price discrimination

Offering the same product at different prices when consumers can be kept separated, based on time or market.

Psychological pricing

Trying to influence the customer's decision, for example by charging lower than a round figure ($9.99).

Promotion pricing

A reduction in the standard price for a particular group of customers

Competition-based pricing

When the price of the competitor is the major influence

Predatory pricing

Eliminate opposition by cutting prices for a limited amount of time, enough for the rivals to go out of business