Pricing strategies
- Created by: 14a.williamson
- Created on: 02-02-19 19:09
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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
- Pyscological pricing
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