Pricing strategies Flashcards
What is Price penetration?
Where a firm charges a very low price when a product is new to get lots of people to try it. Will make very little profit at first but once it has become established the firm increases the price.
What is Loss Leader Pricing?
When the price of a product is set below cost. No profit is made on it, but the idea is that customers will buy other products as well.
What is Price skimming?
Where firms charge a high price to begin with. Often works for established firms as they’ll have loyal customers who will be willing to pay.
What is competitive pricing?
Where the firm has to charge similar prices to other firms. Firm makes very little profit an have to find ways other than price to attract customers.
What is Cost-Plus pricing?
The firm works out the total cost of making the product and then adds a certain amount depending on how much profit they want to make while still having reasonable demand.
