Topic 11 Flashcards
Types of pricing strategies -> cost-plus pricing
Method where a fixed percentage is added to the unit cost of production to determine selling price
Advantages:
-> simple to calculate + ensures profit margin
Disadvantages:
-> ignores competitors prices or market demand = overpricing or underpricing
Types of pricing strategies -> price skimming
Used to introduce products at high price, targeting customers willing to pay more for innovation or exclusivity - often used for new tech or pharmaceuticals
Advantages:
-> recoups high R&D costs + establishes premium product positioning
Disadvantages:
-> may attract competitors to market
Types of pricing strategies -> penetration pricing
Launches a product at low price to gain market share quickly
Advantages:
. Attracts a large customer base quickly
Disadvantages:
. Low-profit margins + difficult to raise prices later
Types of pricing strategies -> predatory pricing
Intentionally lowering prices to undercut competitors and drive them out of market - ilegal in many countries
Types of pricing strategies -> competitive pricing
Setting prices based on competitor prices
Advantages:
-> ensures market alignment
Disadvantages:
-> risks lower profitability
Types of pricing strategies -> physiological pricing
Prices set to appear lower eg. £9.99 to influence consumer perception
Advantages:
-> can make products appear more affordable
Disadvantages:
-> less effective in price-sensitive or well-informed markets
Factors determining pricing strategies
- Differentiation and USP
- Price elasticity of demand
- Competition
- Stage in product life cycle
- Introduction: skimming or penetration pricing
- Growth: competitive pricing to attract consumers
- Maturity: discounting or cost-plus pricing - Cost and profit goals
Changes in pricing with social trends
. Online sales
. Dynamic pricing
. Price comparison sites
. Subscription pricing
