Pros and Cons of pricing strategies 0.0 / 5 ? BusinessAdvantages and disadvantages of Pricing strategiesASEdexcel Created by: darkest_soulCreated on: 16-05-19 12:06 Cost-plus pricing Pros: Ensures variable (direct) costs are covered. Easy to calculate Cons: Ignores competitors & market conditions. Doesn't include fixed costs 1 of 6 Price skimming Pros: Recover the costs of research and development. Maximize profits. Encourages customers to buy due to quality (brand) Cons: Product has to be price inelastic. Customers will wait till price goes down. 2 of 6 Penetration Pros: Cheap pricing - demand can be high and higher sales decrease production costs Cons: May not breakeven Competitors may have cheaper costs thus cheaper price Cheap price = perception of bad quality 3 of 6 Predatory Pros: Good for selling stock which wouldn't sell. Excellent in braking into new market. Destroys competition Cons: Illegal May not breakeven 4 of 6 Competitive Pros: Avoids price wars. Safe - lack of high risks Cons: Competitive advantage ( which might cost in the long term). 5 of 6 Psychological Pros: Customers will attach more importance to a product if the price is lower in terms of perceptions. Cons: Some customers will ignore the pricing strategy due to them being rational. It can be difficult for cashiers to calculate the total amount owed when fractional prices. 6 of 6
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