Marketing Flashcards
What are the Five Pricing Strategies?
Price Penetration
Loss Leader Pricing
Price Skimming
Competitive Pricing
Cost-Plus Pricing
What is Price Penetration? (FPS)
Charge a very low price when a product is new to get more people to try it to establish a market share in a competitive market
E.g. Online subscription based services offering one month free
What is Loss Leader Pricing? (FPS)
When a product is set below cost so it doesn’t make a profit, but the customers will be more likely to buy other products of theirs.
E.g. games consoles are often priced below cost but firms make profit on games that go with them
What is Price Skimming? (FPS)
Where firms charge a high price to begin with when they know there will be high demand for the product (E.g. goods that use new technology and have a desirable USP like electric cars). The high price makes up for research and development costs and makes the product more desirable for people with higher incomes
What is Competitive Pricing? (FPS)
- Where the film had to charge similar prices to their competitors.
- happens when there is a lot of choice ads not much product differentiation e.g petrol.
- the firm may make very little profit and have to find ways other than price to attract customers.
What is Cost-Plus Pricing? (FPS)
When the firm works out total cost of making the product and then adds on a certain amount to profit.
- Mark-up: work out how much the product costs and then add a percentage mark-up e.g 25% Mark up of £2 means selling for £2.50.
- Profit-margin: if the product takes £2 to make and you want a 20% profit margin then it would cost £2.50
