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Pricing (Penetration Pricing (Low price to gain market share, Discourages…
Pricing
Penetration Pricing
Low price to gain market share
Discourages new enterants
High elasticity of demand
Economies of scale
Price Discrimination
Some degree of monopoly
Segregated market
Segments have different elasticity
Different prices for different groups
Factors to Consider
Costs
Competitors
Customers
Demand Based Approach
Profit Maximised when MR=MC
P=a-bQ
a= price when demand is 0
b= change in price/ change in demand
MR= a-2bQ
Price Skimming
Initially high price
Differentiate product
Short Lifecycle
Complimentary Pricing
Linked products
Loss Leaders
Captive markets