Business Marketing mix pricing strategies

Business Marketing mix pricing strategies

Cost plus pricing

The business calculates the unit cost of a product, and then adds a percentage mark-up for profit, e.g. it costs PC world £300 to purchase a laptop which they then mark up by %50 and sell to the customer for £450

Competitive pricing

The price of the product is set similar to competitors prices, e.g. fuel prices

Price skimming

The price is set high to begin with then lowered over time, examples include electronics such as iPads PS4 etc.

Penetration pricing

The price is set low to begin with then raised over time. examples include trial prices on new chocolate bars

Price discimmination

Prices are altered depending on a disciminating factor, exampls include where prices are often charged in the teansport industries depending on age, such as child price, adult price etc

Destroyer/predatory pricing

The price is deliberately set extremely low for a period of time to force out competitors

Loss leaders

A promotional price one or more product is set unprofitably low to entice customers to buy other products

Pyschological pricing

The price is set just below the next rounded number, example, £49.99 instead of £50

Factors affecting pricing strategy

• Target market for the product - mass markets need to be priced in a way that will appeal to most income segments, where as exclusive products aimed at wealthy segments can be priced higher

• Demand for the product - If the demand for a product is high, then the business can maximise profits by setting the price high, once demand drops, it can lower the price to encourage sales, e.g. christmas toys during christmas are high in demand so the business can raise the price

• Objectives of the business- If the objective is to maximise sales, a lower price might be offered. if the objective is to maximise profits, a higher price may be set

• External factors - prices should be lowered during a recession to encourage sales or increased during the boom periods to maximise profits, similiarly, prices may have to be lowered to respond to the prices offered by competitors.