Pricing strategies

Question 1

What are the 5 pricing strategies

Answer 1

Price penetration
Loss leader pricing
Price skimming
Competitive pricing
Cost-plus pricing

Question 2

Price penetration

Answer 2

A firm charges a very low price when a product is new to encourage people
Makes very little profit at first but when the product is established the firm will increase its prices

Question 3

Loss leader pricing

Answer 3

Price of the product is set below cost
Firm doesn’t make a profit but the idea is the people will buy other products too which they make a profit on

Question 4

Price skimming

Answer 4

Charge a high proce to begin with and once the product is established the firm lowers its price
Often works for established firms with loyal customers

Question 5

Competitive pricing

Answer 5

Firm has to charge similar prices to other firms
May make little profit and have to find ways to attract customers

Question 6

Cost-plus pricing

Answer 6

Firms may use this method if they are not in price competition with other producers