Pricing Strategies Flashcards
List all pricing strategies
Skimming Penetration pricing Premium/prestige pricing Psychological pricing Loss leaders Competition based pricing Predatory/destroyer pricing Market based/going rate pricing Promotional pricing Cost plus Contribution/marginal cost pricing Price discrimination
What is skimming? (Pricing strategy)
Set a high price for goods/services in attempts to gain profits quickly
What is penetration pricing?
Setting a low initial price to gain market share then increasing price
What is premium/prestige pricing?
High price set for service/good to create image of high quality
What is psychological pricing?
Setting a price that sounds lower than it actually is
What are loss leaders?
Reducing price of essential products to attract customers with the hope they will buy other products
What is competition-based pricing?
Set prices just lower than that of the competition with the hope of stealing sales
What is predatory/destroyer pricing?
Set prices unreasonably low to create barriers to entry for new firms attempting to enter the market
Often seen as an anti-competitive practice, can only be used by large firms as doing this may incur losses
What is market based/going rate pricing?
Pricing products at the same as they are currently being sold in the market
What are some of the different forms of promotional pricing?
Buy one get one free
Price reductions
3 for 2 offers
Loss leaders
What is cost plus pricing?
Setting prices at a mark up from the original cost of the product
What is contribution/marginal cost pricing?
Fixed costs and overheads are ignored and only variable costs are looked at.
Prices set to help to cover variable costs
What is price discrimination?
When prices are changed based on the area they’re being sold in or the time they’re sold at
