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Pricing Strategies - Coggle Diagram
Pricing Strategies
Predatory pricing
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is where the business sets a low price in order to price competitors out of the market. the business may make a loss for a period of time until the competitor fails.
Value for money
a business cannot make a profit unless they consider their costs alongside any pricing strategy. customers do not care about the costs of a business, they simply want value for money. businesses must understand the value customers place on their product and not simply the costs of production.
a business can charge a higher price for its produce if it has a unique selling point (USP) or can offer something different and innovative compared to a competitor. customers value the particular USP and are prepared to pay over the odds for it.
Competitive pricing
when the business sets prices based on the nearest competitor. this is used in very competitive markets and helps avoid price wars.
Psychological pricing
when the businesses bases the price below the next whole number to trick consumers into thinking the price is lower. so $9.99 psychologically appears cheaper than $10.
Price skimming
when the business sets an initially high price for a new product when it is in high demand, and decreases the price over time.
Cost-plus pricing
when a business bases a price on the unit cost and then adds a percentage as a mark-up. this strategy is effective as it considers the profit margin the business is willing to accept.
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Adapting to the market
social trends such as these will have a significant influence on how businesses adapt their pricing over time. overall, the key is for as business to monitor the market and be ready to adapt.
auction sites
Ebay and Gumtree allow customers to gain the best prices, but through a sense of urgency encourage people to bid so they don't miss out. many businesses use these sites for selling alongside their own e-commerce sites.
price comparison sites
sites such as Uswitch (energy) or Triage (hotels) make it easy for customers to compare prices and choose the best deal. businesses have to remain competitive in a dynamic market.
personalised pricing
technology and online databases collect customer information and allow businesses to target them with a personal price.
subscription pricing
a business charges customers a monthly fee to use a service. this is suitable for online services such as film rental sites.