Pricing Strategies

• what are pricing strategies?

  the methods that an organisation uses to price a product in order to meet marketing objectives
• what are the pricing strategies?

  • price penetration
  • price skimming
  • cost-plus pricing
  • psychological pricing
  • competitive pricing
  • dynamic pricing
  • predatory pricing
• what is price penetration?

  setting a low price at launch and increasing the price later in the product life cycle
• what is price skimming?

  setting a high initial price at launch and lowering it later in the product life cycle
• advantages of price skimming?

  • maximises revenue
  • recovers development costs
• disadvantages of price skimming?

  • limits sales
  • attract competition
• advantages of price penetration?

  • grow market share
  • economies of scale
• disadvantages of price penetration?

  • low profit margins
  • risk to brand image
• what is cost-plus pricing?

  based on a percentage mark up on the unit cost of producing the product or service
• what is competitive pricing?

  Setting prices for products or services based on the prices set by competitors in the market. often the same or lower
• what is dynamic pricing?

  Pricing strategy that adjusts prices in real-time based on various factors
• what is psychological pricing?

  Pricing strategy that influences consumer perception and behavior.
• what is predatory pricing?


  Predatory pricing is a strategy where a company sets very low prices to drive competitors out of the market.
• what is a price comparison site?

  websites that consumers can visit to compare prices. it increases buyer power and rivalry.
• advantages of cost-plus pricing?

  • ensures profit margins are met
• disadvantages of cost-plus pricing?

  • doesnt factor the rest of the market
  • sales may be too low to generate a profit
• advantages of competitive pricing?

  • avoid price wars
  • protect market share
• disadvantages of competitive pricing?

  • promotional cost
  • competitive price may not be enough to cover costs
• advantages of dynamic pricing?

  • maximise revenue
• disadvantages of dynamic pricing?

  • can lead to negative reactions from customers
• advantages of psychological pricing?

  • maximise revenue
  • almost no costs to the business
• disadvantages of psychological pricing?

  • can be considered manipulative
• what are the types of psychological pricing?

  • charm pricing (£9.99)
  • bundle pricing
  • reference pricing (displaying a higher price next to the discount)