Summary
Summary Pricing Strategies
- Institution
- PEARSON (PEARSON)
Describes the types of pricing strategies - e.g. price skimming, penetration pricing, cost plus pricing, predatory pricing
[Show more]
Content preview
Theme 1 Topic 16Pricing Strategies
Types of Pricing Strategy
Price – the amount of money for which something is exchanged
Suitable for Introducing a New Product:
Price Skimming
High starting price but may decrease over time
Profit is maximised over the product lifecycle
Good for new products aimed at trend setters
Penetration Pricing
Low starting price to gain market share and build customer loyalty
May increase later
Good for new products
Competitive Pricing
All similar producers charge a similar price
It fluctuates slightly
Other Pricing Strategies
Cost Plus Pricing
Total cost of a product plus a % mark up
E.g. A firm has total costs of £30,000 per month. It produces 15,000 widgets per month. Price is
calculated by adding 20% to unit cost. What is the price charged?
20% of 30,000 = 6,000 36,000/15,000 = 2.4
30,000 + 6,000 = 36,000 Price Charged = £2.40
Predatory Pricing
Charging lower prices to get rid of competition in a market and increase market share
May make a loss
Psychological Pricing
Price based on customer expectations
Customers may believe a product is cheaper than it is e.g. £9.99
Customers may think a high price makes a product better
Online Sales
Changes in pricing have occurred which reflects social trends.
The growth of Amazon, eBay, and supermarkets (e.g. Tesco for ordering groceries) has changed shopping
habits. Buying online makes it easier to compare prices and to buy from the cheapest retailer.
Price Comparison Sites – created a climate of competitive pricing, by showing customers the best deals on
items.
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller emily1744. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for £3.49. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
52355 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy revision notes and other study material for 14 years now