Price

• Cost-plus pricing: the cost of manufacturing the product plus a profit mark-up
• Competitive pricing: when the product is priced in line with or just below competitors' prices to try to capture more of the market.
• Penetration pricing: when the price is set lower than the competitors' prices in order to be able to enter a new market.
• Price skimming: a high price is set for a new product on the market.
• Promotional pricing: when a product is sold at a very low price for a short period of time
• Dynamic pricing: when businesses change product prices, usually when selling online, depending on the level of demand.
• Price elastic demand: when consumers are very sensitive to changes in price.
• Price inelastic demand: when consumers are not very sensitive to changes in price.
• Price skimming:

  • Advantages:
  • Profit earned is very high
  • Helps recover research and development costs
  • Disadvantages:
  • It may backfire if competitors produce similar products at a lower price
• Penetration pricing:

  • Advantages:
  • Attracts customers more quickly
  • Increase market share quickly
  • Disadvantages:
  • Low revenue due to lower prices
  • Cannot recover development costs quickly
• Competitive pricing:

  • Advantage:
  • Business can compete on other matters (service and quality)
  • Disadvantage:
  • Still need to find ways of competing to attract sales.
  • If unit costs are higher than those of competitors, a loss might be made
• Cost plus pricing: 

  • Advantages:
  • Quick and easy to work out the price
  • Makes sure that the price covers all of the costs
  • Disadvantage:
  • Price might be set higher than competitors => customers are willing to pay => reduces sales, profits
• Promotional pricing: 

  • Advantages:
  • Helps to sell off unwanted stock before it becomes out of date
  • Good way of increasing short term sales and market share
  • Disadvantage:
  • Revenue on each item is lower so profits may also be lower
• Dynamic pricing:

  • flexible pricing - price changed to match market demand/type of consumer
  • e-commerce - prices can be changed quickly
  • sales revenue likely to rise with this method
• Price elasticity of demand:

  • price elastic demand - business likely to reduce prices (PED > 1)
  • price inelastic demand - business likely to raise prices (PED < 1)