Marketing Strategies - Price

• What is the formula for cost-based pricing?

  Cost + % = Price
• Why is cost-based pricing difficult to implement?

  It is difficult to accurately determine markup
• What does market-based pricing depend on?

  The interaction between levels of supply and demand
• In which market condition is competition-based pricing typically used?

  In highly competitive markets
• What is a common practice in competition-based pricing?

  Undercutting competitors
• What are the main pricing strategies discussed?

  • Price Skimming
  • Price Penetration
  • Loss Leaders
  • Price Points
• What is price skimming?

  Selling to the top of the market at a high price
• Why can companies get away with price skimming?

  Due to no/little competition and customer perception of a prestige product
• Which company is an example of price skimming?

  Apple
• What is a potential problem with price skimming?

  Customers may refuse to pay the high price
• What is price penetration?

  Charging the lowest price possible to achieve a large market share
• What is the purpose of loss leaders pricing?

  To attract customers to the business
• What are some reasons for using loss leaders pricing?


  To promote other products, sell off stock, or build a reputation
• What is a potential problem with loss leaders pricing?


  The business makes a loss on the product
• What are price points?

  Charging a predetermined price for a product, regardless of the cost
• Why do businesses use price points?

  To create simplicity for the customer and encourage them to buy more expensive products
• What is a potential problem with using price points?

  Some products may provide a lower profit than others