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Pricing methods and strategies - Coggle Diagram
Pricing methods and strategies
Cost plus.
Forms the basis of all pricing decisions.
Average cost of one item is calculated (total cost : number of units) and mark-up (profit margin) is added to give the final selling price.
Competitive pricing.
Priced charge is set at the same level as other products in the market and a level customers expect/are willing to pay.
Psychological pricing.
Penetration pricing.
When a product is launched into an established and competitive market, for the first few weeks/moths its price may be set low to attract customers.
Price skimming.
When a product is first to market, a high price is often charged.
Firms can also benefit from high profits margins when a product is new and desirable.
Promotional pricing.
Reducing the price of a product or service to attract customers.
The method includes BOGOF (buy one get one free) promo, money-off coupons and introductory offers.
Dynamic pricing.
Uses e-commerce to alter prices day-by-day, hour-by-hour, or minute-by-minute.
Premium pricing.
High price approach is used where a product has significant competitive advantage or is differentiate from the competition.
Used where a strong brand image has been developed.
Discriminatory pricing.
Different prices are charged to different groups of people at different times.
Geographical prices.
Prices vary according to the location of the store or outlet.