Business - Pricing Strategies

What is penetration pricing?

A strategy where a business offers a low initial price to increase market share.

What is a potential downside of penetration pricing?

It can lower short-term profits.

What is a loss leader?

A product sold at a loss to attract customers hoping for additional purchases.

Why do businesses use loss leaders?

To attract new customers or encourage existing customers to buy more.

What is competitive pricing?

Setting prices based on what other firms in the market are charging.

When is competitive pricing typically used?

When products in a market are similar.

Provide an example of a market where competitive pricing is common.

Petrol sold at petrol stations.

What is cost-plus pricing?

A strategy where a business charges based on production cost plus a markup.

How does cost-plus pricing work?

Calculate production costs, then add a markup to ensure gross profit.

Give an example of cost-plus pricing.

If a tyre costs £80 and a 25% markup is added, it sells for £100.