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1.3.3 Pricing Strategies - Coggle Diagram
1.3.3 Pricing Strategies
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Predatory Pricing
When a business lowers prices to force another business out of the market then raise the prices back up once the competitor is out of business.
This is illegal under EU and US law, but hard to prove.
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Price Skimming
When new and innovative products are sold and high prices when they initially enter the market, this is commonly seen in the tech industry.
Prices then drop off after a year on the market as everyone willing to pay extra to be one of the first hot own the product has got one.
However, this can put off potential customers with the high inital price.
Penetration Pricing
The opposite to price skimming. Launching a product as a low price to attract customers and gain market share.
Works best for businesses that can benefit from lower costs when manufacturing larger quantities of a product.
However, customers may expect the low price to contiue and do its hard to raise it without loosing customers.
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Changes in Social trends
Online Retailers
May choose to compete with other aspects of final pricing such as free delivery or free returns. Which may make the customer more willing to pay a higher price for the product itself.
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Price Comparison Sites
Consequence for retailers is that they need a effective information system so that theyer aware pf prices charged by there competitors, so they can be price competitve.