Pricing stratergies Flashcards
What is cost plus pricing ?
adding a percentage to the cost of making the product to give the selling price
Why is cost plus pricing easy to implement?
easy to calculate = quick
How does cost plus pricing guarantee profit?
pricing above the cost
what does cost plus pricing not consider?
product might not sell because of the competition
What is competitor pricing?
When a price is set based on prices charged by competitor businesses for a similar or identical product
How can competitor pricing help maintain or grow market share ?
it’s advantageous in markets
encourage customers to buy products
what is promotional pricing?
reduction in price to attract customers to an existing product or to sell of old products.
(includes BOGOF)
advantages of promotional pricing ALE
attract customers into stores
breaks loyalties with other brands
encourage to buy more
disadvantages of promotional pricing
customers may get used to promotions and not buy at full price anymore
lead to stock not being available for customers who usually buy full price
What is price skimming ?
more advanced product than that of competitors, so a price is set high customers are willing to pay high price , after so e time it will be reduced
advantages of price skimming
help build a reputation for high quality products
potential for high sale revenue
Disadvantages of price skimming
long term = competitors will enter the market and apply pricing pressure
may lead to low sales volume
What is penetration pricing?
new to the market it will set price lower than a competitor business
short term stratergy to help break customer loyalties from trusted brands
advantages of penetration pricing
can be promotional when a business / product first launches
breaks loyalties
disadvantages of penetration pricing
likely results in retaliation from established competitors
creates expectations from customers
