Pricing strategies

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  • Pricing strategies
    • Pyscological pricing
      • Using words such as ‘only’ or using multiples of 99p to try and trick the customer that they are getting a bargain
      • “Only £4.99”
      • Customers are becoming aware of it, and it is often a sign of a cheap product
      • Customers buy the product as they form an emotional bond, and think they are getting a bargain
    • Price skimming
      • Launching a product at a very high price, and then lowering the price overtime
      • Apple price their new products at a very high price- it increases the want for the product
      • High profit margin
      • Very low sale numbers
      • Increases product desirability
      • Used for luxury of high ticket items
    • Penetration pricing
      • Launching a product at a very low price, to try and get customers from all over the market to buy your product
      • Having a limited offer on a sweets to get customers interested
      • It may lead to a small profit margin if it is priced too low
      • Customers build a bond with the product, so continue to buy it at a high price
      • When prices are raised, they may see a fall in sales
      • Good to get into a competitive or crowded market
    • Cost plus pricing
      • Taking the cost price and adding a percentage profit margin
      • Clothing companies do this, such as primark
      • Changes in supplier prices are covered by the customer, not the business’ profit margins
      • Doesn’t take into consideration competitors prices
      • Doesn’t take into account customers needs and wants
    • Competitor pricing
      • Pricing goods at the same price as competitors
      • Costa and Starbucks could price their coffee at the same price
      • Unlikely to be price that makes customers choose a certain business (it will be branding or quality)
      • Doesn’t take into account cost price from the supplier, so they may not get a good profit margin
    • Loss leaders
      • Having some products at cost price, or sometimes even less, at the hope customers buy other products
      • Having potatoes at cost price to get customers to buy other food
      • Customers buy products that have much higher profit margind
      • No profit margins
    • Price discrimination
      • Giving the same product different prices, depending on different factors (age, time, location)
      • A cinema does this, as it is more expensive for adults and at peak times

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