Price strategies

• Cost-based pricing

  • Different prices are charged for the same product depending on the time, age and etc.
• Penetration pricing

  • Low price at start to access gain to the market
  • Often used when there are closed competitors
  • Price is raised over time
• Promotional pricing

  • Vouchers/offers/discounts are offered to encourage customers
  • Prices are reduced for a short period of time
  • Used to quickly sell inventory and aid cash flows
• Skimming pricing

  • Setting a high initial price for the product when it is new
  • Ideal to use when there is little to no competition
  • Prices gradually lowers overtime
  • High profit margins during the introduction stage to help recover costs
• Destroyer pricing

  • Prices are kept very low to destroy competition
  • Illegal in the UK
• High/premium pricing

  • Using a price to deliberately to signal that the products are luxurious, good quality/exclusive image
  • Sales will be lower but there will be high profit margins on each sale
• Low/valuing pricing

  • Long term pricing strategy setting the price below the competiton
  • Customers will often look for a cheaper alternative of a way of saving money
• Psychological pricing

  • A price which makes the customer thinks that is a lot cheaper for example 99p instead of £1
• Loss Leaders

  • Price of one item is set much lower than that of competitors
  • Often a pricing tactic used by supermarkets
  • A loss is made on this product but it brings customers to the shop to buy the products where they are enticed to buy other full price items
• Dynamic pricing

  • Prices will vary, low when demand is low and high when demand is high
  • Cheap flights at different times of the year
• Market/Competitive

  • Long term price strategy selling the price similar to other competitors
  • Requires ongoing promotion/advertising