1.3.3 Pricing Strategies

• Pricing


  The pricing strategy used by a firm
• Cost-plus Pricing


  Adds a fixed percentage of profit to the costs. Protects profit margins, easy, but may not be price competitive
• Penetration Pricing


  Setting prices low to encourage sales, beneficial for new products, but reduces sales revenue and profits
• Predatory Pricing


  Setting low prices so entrants can't make a profit, but if demand is elastic demand will increase at low prices
• Skimming


  Prices start high creating a luxury image and high profits, but imitations take sales
• Competitive Pricing


  Pricing in line with competitors, but may not cover costs for small firms that don't have EoS
• Psychological


  Pricing a product to make it appear more valuable, ideal for products with a premium image, but high prices may mean less sales
• Factors Determining a Pricing Strategy

  Number of USPs, PED, competition, costs, stage in the product lifecycle, strength of brand
• Product Lifecycle


  Development, launch, growth, maturity and decline