4.5b Price

• Pricing decisions are base on DRASTIC factors: Demand, Rivalry, Aims, Supply, Time, Image and Costs of production.
• Cost-plus (mark-up pricing) is when the average cost of a unit has a percentage markup added to it.
• Penetration pricing is when products are initially sold at a low price to try to break into the market, gain market share and then increase in price.
• Loss leader pricing is when products are sold at or below their cost value to either tempt customers to buy more profitable items in the store or because the loss can be recouped by selling complementary products ie. coffee pods.
• Predatory pricing is when a business temporarily reduces prices with the intention of forcing a competitor out of a market.
• Premium pricing is when a product is set to a significantly higher price than similar competing products.
• Dynamic pricing is varying the price of a product to reflect changing market demand.
• Competitive pricing is when a firm sets the price of its product to a similar level to its competitors either : above, the same or below competition.
• Contribution pricing is when a price is based on the direct costs of producing a product.
• Price elasticity of demand measures the degree of responsiveness of demand for a product due to a change in its price.
• Price elastic products experience a large change in demand ie. chocolate.
• Price inelastic products experience small change in quantity demanded ie. fuel.