marketing pricing

Cost Plus Pricing

• When a business decides the price by adding some extra money (profit) on top of how much it costs to make the product

• (ex. If it costs 10$ to make a water bottle and the store adds 5$ to make profit they sell it for 15$  )

Penetration Pricing 

• When you set a product at a low price at first to attract customers and then increase the price once the product becomes popular

• (ex. When a new chip brand sells, it sells at 1$ but once people start buying the product regularly the price goes up to 2$) 

Skimming Pricing 

• Setting a high price at first on a unique or new product and lowering the price later as competition increases. 

• (ex. When a new iphone comes out it is very expensive, after a few months or when a new model is released apple lowers the price to reach more customers. ) 

Competitive Pricing

• Selling the price of a product based on what competitors are charging for a similar product 

• (ex. If a shoe store is selling their running shoes for 100$, a new store that carries running shoes will price their shoes around the same price to stay competitive )

Psychological Pricing 

• This is when you use prices that you think are lower than they are

• (ex. When a shirt is sold at $19.99 to make it feels cheaper than $20)

Value-Based Pricing

• Meaning: Setting prices based on how much customers believe the product is worth, not just the cost to make it.

• Example: Apple charges high prices for iPhones because people value their design, brand, and performance.

Bundle Pricing

• Meaning: Selling two or more products together at a lower combined price than if bought separately.

• Example: McDonald’s “combo meals” (burger + fries + drink) or a software suite like Microsoft Office.

Premium Pricing

• Meaning: Setting a high price to show that a product is luxury or high quality.

• Example: Rolex watches, Gucci handbags, or Tesla’s high-end models.

Economy Pricing

• Meaning: Keeping prices very low to attract customers who want basic, no-frills products.

• Example: Walmart’s “Great Value” brand or store-brand products like No Name.

dynamic Pricing

• Meaning: Prices change based on demand, time, or customer behavior.

• Example: Airline ticket prices going up during holidays, Uber surge pricing, or hotel rates changing during busy seasons.

Freemium Pricing

Offering a basic version for free, but charging for premium features or upgrades.

Example: Spotify or Canva — free to use, but extra features require payment.

Geographical Pricing

Setting different prices in different locations due to shipping costs, taxes, or demand.
Example: A McDonald’s meal might cost more in a big city than in a small town.

Promotional Pricing

Temporarily lowering prices to boost sales or attract new customers.
Example: Black Friday discounts or “Buy One, Get One Free” deals.

Captive Product Pricing

Selling the main product cheaply but charging more for accessories or refills that go with it.
Example: Printers are cheap, but ink cartridges cost a lot.

Optional Product Pricing

Selling a main product at a standard price, and offering add-ons or upgrades for an extra cost.
Example: Airlines charging extra for baggage, meals, or seat upgrades.

profit margins

Amount of profit the company wants to make from the sale.

Break-Even Analysis (BEP)

A Break-Even Analysis determines how many units of a product must be sold at a certain price to cover all costs (both fixed and variable). At this point, the business makes no profit and no loss. The coffee shop must sell 167 cups in a month to cover all costs. Anything sold beyond that is profit.

Variable Costs (VC)

• Costs dependent on quantity sold.

• Rise and fall based on the number of customers or units produced.

• Examples: raw materials, ingredients, packaging, shipping, sales commissions, maintenance.

• Not dependent on factors like weather, seasons, management decisions, or efficiency.

• Example: Coffee cups cost $2.50 for 8 customers; $3 for 10 customers.

fixed costs

• Do not change regardless of how many units are sold.

• Constant expenses.

• Examples: rent, insurance, salaries, utilities, administrative costs.

• Example: Rent stays the same whether 8 or 10 customers visit.

Break-Even Point (BEP)

• Formula: BEP = Fixed Costs ÷ Gross Profit per Unit

• Represents the number of units that need to be sold to cover costs (start making profit).

Total Cost (TC)

This is the sum of all costs — both fixed and variable. Formula: Total Cost = Fixed Cost + Variable Cost

Example: If rent is $500 (fixed) and materials cost $200 (variable), total cost = $700.

Fixed Cost per Unit

This is the fixed cost spread over each unit produced.

Formula: Fixed Cost per Unit = Total Fixed Cost ÷ Number of Units Produced
Example: If rent is $1,000 and you make 100 products → $1,000 ÷ 100 = $10 per unit.

variable cost per unit

This s is the cost to make one unit — it changes with production

Formula: Variable Cost per Unit = Total Variable Cost ÷ Number of Units Produced
Example: If materials cost $500 for 100 products → $500 ÷ 100 = $5 per unit.

Total Cost per Unit

This is the overall cost to make one unit, including both fixed and variable parts.

Formula: Total Cost per Unit = Fixed Cost per Unit + Variable Cost per Unit
Example: $10 (fixed per unit) + $5 (variable per unit) = $15 per unit.

five key elements 

1. Clear Target Audience: Knowing exactly who you are selling to (demographics and psychographics)2. Value to the Consumer: Clearly communicating what the customer gets and the product's competitive advantage (value proposition).3. Quality Content & Design: Using consistent, high-quality, and appealing visuals/audio (e.g., special effects, well-known music, celebrity endorsement).4. Call to Action (CTA): Encouraging the audience to take an immediate step (e.g., "Buy Now," "Sign up!").5. The Follow Up: Checking in with the customer after the initial contact to remind them and build long-term trust.