1.3.3 pricing startegies Flashcards
what is predatory pricing?
where businesses set a low price in order to price competitors out of the market and hold off a new entrant
e.g Ryanair
what is competitive pricing?
when businesses sets prices based on the nearest competitor. this is used in very competitive markets and helps void price wars.
e.g asda, Tesco
what is psychological pricing?
when the price is below the next whole number to trick consumers into thinking the price is lower
e.g £9.99
what is price skimming?
when businesses sets initially a high price for a new product when it is high demand, then the price will fall over time
what is cost-plus pricing?
the cost to produce the products are worked out, then the percentage mark up is added on top
what is penetration pricing?
means setting prices really low on a new product to encourage sales. after it creates consumer loyalty, the price rises
what factors determine the most appropriate pricing strategy?
- level of competition in the market
- strength of brand
- number of USPs/ amount of differentiation
- price elasticity of demand
- stage in the product cycle
- costs and the need to make a profit
how do businesses adapt prices to reflect social trends?
- personalised pricing
- subscription pricing
- dynamic prices
- auction sites
- price comparison sites
