Finance

What are the 5 pricing strategies?

Cost-plus pricing , Competitive pricing , Price skimming, penetration pricing , value based pricing

Cost-plus pricing

Calculate your costs and add a mark-up.

Advantage – simple pricing method

Disadvantage – does not consider customer or variations in demand

Competitive pricing.

Set a price based on what the competition charges.

Co-operative – match price

Aggressive – Price lower when price drops, hold

when competitor price rises

Dismissive – ignore because we have a premium product

Price skimming

Set a high price and lower it as the market evolves.

Advantages

Helps to create impression of a quality/prestige brand

Customers anticipate premium price on future products

Disadvantages

Price skimming period short

Need to reduce price in time before customers move elsewhere

Penetration pricing

. Set a low price to enter a competitive market and raise it later.

Good when there are several similar products and customers are price sensitive

Lower price will stand out

Risks – customers may expect low prices always, price sensitive customers are disloyal, possibility of a price war

Value-based pricing.

Base your product or service’s price on what the customer believes it’s worth.