MS - pricing strategies (short term tactics)

Question 1

pricing strategies/tactics

Answer 1

Once the basic price has been set using the preferred pricing method(s), the business then fine-tunes this price in line with its pricing strategies

Pricing strategies are short term tactics used to achieve specific and more immediate marketing objectives

NOTE various pricing strategies can be used and it is common for a business to use several at once, even for the same product

Question 2

Short term pricing tactics include:

Answer 2

 Penetration pricing
 Market skimming
 Loss leaders
 Price points

Question 3

penetration pricing

Answer 3

This tactic involves a business starting with a very low price which is raised over time

It is usually used by a business to enter into a new market, existing market with a new product or to increase market share

Benefit: Captures a larger amount of customers more efficiently in a rapid time, captures initial interest

Limitations: consumers can leave straight after. Reduces short term sales revenue

Question 4

market skimming

Answer 4

When using this tactic, a business starts with a high initial price which is then reduced over time.

It is usually used when there is no competition in the market of if the business has a new feature or benefit that others cannot match. It allows the business to reinforce the exclusivity/quality of a product.

Benefits: greater profitability due to greater margin between cost and price, build brand representation around brand luxury or uniqueness

Limitations: demand is not going to be at the level you may prefer due to the high price.