Pricing strategies

Question 1

Positive+ negative of penetration

Answer 1

The price is set low to begin with and increases over time, this encourages the customer to try a new product, but very little profit can be generated during the initial low price period

Question 2

Positive and negative of skimming

Answer 2

Sufficient ‘hype’ around a new product enables higher prices to be charged, which can increase profits. High initial prices can put off some customers.

Question 3

Positive+ negative of Competitive pricing

Answer 3

Price of the product is set similar or same to competitor, this avoids a price war, other elements of the marketing mix must be better than the competitions to ensure sales

Question 4

Positive+ negative of Destroyer pricing

Answer 4

The price is deliberately set extremely low for a period of time to force out competition, this increases their market share, this is illegal in many countries and is strictly regulated