Please enable JavaScript.
Coggle requires JavaScript to display documents.
1.3.3 Pricing strategies - Coggle Diagram
1.3.3 Pricing strategies
For new products
Price skimming
High price to enter the market. Even though the price is high, some people may still be eager to try a new product. Once sales from this group have been exhausted and competing products enter the market - the price can be dropped to attract a new segment. This is appropriate if the business wants to protect its inventions or ideas from cheaper competitor versions
-
-
Penetration pricing
This strategy uses a low price to enter the market and gain market share then increases as it becomes popular
advantages
-
-
since low initial prices - may persuade retailers to buy a lot (will benefit from economies of scale) - boosts distribution
-
For existing products
cost-plus pricing
method of pricing which considers the total cos per unit and then adds on a percentage to arrive at a final price
-
-
appropriate to use when the firm is a market leader with little to no need to worry about competition
Predatory pricing
when a firm sets out to destroy the competition through low prices. This usually occurs if the firm has more financial resources than the competition and so can sustain lower prices for longer.
benefit
once rival has been pushed out of the market, business can then rise their prices - increases profit margins
drawback
if it is proven to drive rivals out of business, this is then illegal
-
Competitive pricing
some firms set their prices at the same level as their competitors. This makes sense if the market is highly competitive and consumers can easily compare the offerings of different firms
-
-
-
Psychological pricing
-
advantage
can help nudge customers into making a purchase by helping them to believe they are not quite spending the amount it can be rounded up to
-
-
-
-
-
-
-