Price - Pricing Strategies Flashcards
What is “Market-led” pricing?
A pricing strategy used if the price of prod helps to decide whether to but it
What are the 4 different pricing methods?
Penetration pricing
Loss Leader pricing
Price skimming
Competitive pricing
What is “Penetration pricing”?
Where a firm charges a very low price for a new product to get interest
What is Loss Leader Pricing?
The price is set below cost and increased once product is established
What is Price Skimming?
The opposite of Penetration pricing. CHarge high price to begin with to make it desirable to those with large incomes, the price is then lowered to become a mass-market prod.
What is competitive pricing?
Where a firm has to charge similar prices to other firms - usually when there is lots of choice & not much differentiation - like petrol
When might “Cost plus” pricing be used?
When firms are not in price competition with others
Give the two examples of “Cost plus” pricing.
Mark-up - Take cost then add a % mark-up
Profit margin - Take product cost & increase by required profit margin.
Explain how to add a “Mark-up”
Take cost then add a % mark-up
EG - cost £2 add mark-up of 25% = £2.50 sell price
Explain how to add a “Profit margin”
Take cost & increase by required profit margin
EG - Cost £2 & you want to make 20%
£2 is 80% of your required selling price
1% is 2.5p x 20 = 50p - Selling price £2.50
