2.2 Marketing Mix - Price Flashcards
What are the types of Pricing Strategies that businesses can employ?
Penetration Pricing:
It means setting a relatively low price to boost sales. It is often used when a new product is launched, or if the firm’s main objective is growth
Cost Plus Pricing:
It’s a methodical approach that aims to ensure the business covers it’s costs and makes a profit. It works by calculating the cost of providing the product and adding a percentage on to decide the price. Eg - Apple iPhone
Price Skimming:
A high price is set for the product when it first enters the market. This strategy is used when there is a high demand. Eg - New computer console
Competitive Pricing:
This is used to try to match the price that others are charging. This strategy helps to show customers that they offer good value. Eg - Supermarkets and Insurance companies
Loss Leader: A business sells a product so the customer will buy more or something else where the firms make a profit. Eg - Computer consoles
What factors will affect pricing decisions?
Level of competition in the market
How much it costs to produce the goods
Nature of the product (unique etc)
How can pricing decisions be used to help growth?
To grow, a business needs booming demand from customers and enough profit to be able to finance the growth. Both demand and profit require clever pricing.
