Price

• When deciding on a price to sell at, the business must think about:

  • Competitors prices
  • Total cost of production + selling a product or providing a service
  • Income of the people who will purchase the product
  • The amount of profit the firm wants
  • What the reputation of the business is/if the business is well known
• After a business sets their price, it must be checked constantly due to:

  • Price reduction by competitors
  • New firm entering the market
  • A change in the cost of production
• Pricing Strategies:

  • Premium Pricing - charging a high price to associate a high status with the product. Ex) Rolex
  • Competitor Pricing - matching the price of the competitor
  • Penetration Pricing - setting a low price for the product so the business can break into the market
  • Price Discrimination - selling the same product to many consumers with different prices due to the consumer's ability to pay. Ex) students have a discount for most goods and services
  • Loss Leader - the business prices necessities such as bread below cost price to attract consumers, who then look around for other goods.