Cost plus pricing
Involves the business working out the cost of producing one unit of the product and the adding a % for profit.
E.g. cost of producing one toy is £6 and the mark up price is 200%, the £12 will be added on to the cost = £18.
Price is set to ensure variable costs of production are met. Any extra will be a contribution to the company’s fixed costs.
E.g. If variable cost of production for a doll is £12 and its sale price is £25, the contribution would be £13.
Involves charging different prices to different groups of consumers for the same service.
Used by the supermarket sector, may involve a introductory offer or a special promotion.
Using prices such as £9.99 to convince consumers they are paying less.
This is used mostly by the technological sector where they release a new console at a high price allowing them to recover their research and development costs. Consumers who wish to purchase it at a high price will do and then the firm will reduce the price to appeal to a mass market.
Involves introducing a product at a lower price and then later increasing it. Used to attract customers to convince them to buy the good.
Involves selling one good at a loss to encourage consumers into the shop which will lead to increase in sales for other goods.
May be used by larger firms to try to force smaller competitors out of business.