15 terms

Marketing - Pricing strategies and methods

Penetration pricing
Where the product is low priced in order to enter the market
Demand pricing
Where the firm tries to determine what price the market is prepared to pay for the product
Mark-up pricing
Adding a percentage of the cost price to the cost price to get the selling price
Psychological pricing
For example, $19.95 is perceived to be significantly less than $20.00
Cost-plus pricing
Where a set profit margin is added to the cost of production
Regulated pricing
The prices of some products are controlled by the government (eg petrol), so no decision about price is required
Skim pricing
Where the product is priced relatively high in order to achieve maximum returns before the entry of competitors
Recommended pricing
Prices are sometimes recommended by the manufacturer or wholesaler (RRP)
Competition (competitive) pricing (going rate)
Using competitors' prices as a guide (charge the same or a little less)
Complementary pricing
The price is set low on one item and high on another item that would normally go together (eg suit, shirt and tie or coat and scarf)
Prestige (or premium) pricing
Based on the product's 'image' that has been established through positioning
Price leadership
When a business wishes to be the market leader, which means that they set the prices for the rest of the competitors in that industry
Loss leader pricing
The product is sold for less than it cost to make or supply
Market-oriented pricing
When a market chooses its price to take advantage of market conditions
Breakeven Analysis (Cost-volume-profit analysis)
Analysis that helps managers to determine how much a business will need to produce in order to make a profit