1.3.3 pricing strategies Flashcards
price strategies when launching new product
price skimming - charge high price whn first launched , when product innovative, less competition, recover research and development costs
price penetration - charge low rpice for a short period of time to gain market share as alreadx competitiros in market
advantages and disadvantages of price skimming
+ establish an up market image
+ harvest high profits from early buyers
+ get costs of research and development back
-cheaper imitations may appear sooner and take away sales
-customers put off by high price
-initial customers frustrated as price lowers as time goes by
advantages and disadvantages of price penetration
+ Attracts customers rapidly by offering lower prices.
+ Discourages Competition
+ Builds Customer Loyalty
+ generates High Sales Volume –> high ecenomies of scale
-Brand Perception Risk – May create a low-quality image if prices are too low.
-Customers may leave when prices rise.
-Difficult to maintain low prices without financial strain
lond term pricing strategies
cost plus pricing - production cost plus percentage mark up that reflects profit level that company wants from product
competitive pricing - price set at marker level (when fiercly competitive market)
predatory pricing - setting prices low enough to drive a rival out of business over large period of time (illegal)
short term pricing tactics
loss leaders price set deliberately low on certain items e.g. easter eggs before eater to get you in supermarket and buy complementary products
psychological pricing- price level seems lovel to consumer e.g. 9.99
factors that determine the most appropriate pricing strategy for a particular situation
cost of production
competitos
costs and the need to make profit
level of demand
stage in product life cycle
differeantion usp
target market
price elasticity of demand
pricing strategies adapting to social trends
online
dynamic pricing
auction sites
personall selling
subsciption pricess
comparison websites
