1.3.3.Pricing Strategies

Question 1

Types of pricing strategies

Answer 1

-Cost plus pricing: calculating cost of production then adding a mark up to determine final price
Cost plus= unit cost+(mark up % X unit cost)
-Cost of production -Desired profit margin

1.Price skimming: high price for a new product when it’s first introduced to market, then lower over time.

2. Penetration pricing: low price for new product when 1st introduced to gain market share quickly
3. Competitive pricing: setting prices based on those of competitors

4.Psychological pricing: illusion of value by setting price as 9.99 instead of 10. Takes into account customers emotions, beliefs towards product

5.Predatory pricing-setting prices so low that it drives it drives its competitors out of market. Illegal as it’s anti competitor and harms customers by reducing choice in market

Question 2

Factors determining most appropriate pricing strategy

Answer 2

1.No. Of USPs/differentiation
2.PED
3.Level of competition
4.Strength of brand
5.Stage in PLC
6Costs+need to make profit

Question 3

Changes in pricing to reflect social trends

Answer 3

1.Online distribution
2.Changing from product to service