Business Studies - Price - Pricing Strategies

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There are two main types of pricing strategies...

1) Market-Led Pricing

A firm will use a market-led pricing strategy if the price of the product helps consumers decide whether to buy it - which is most of the time. There are four different pricing methods you need to know.

  • Penetration Pricing - is where a firm charges a very low price when the product is new to get lots of people interested in it.
  • Loss Leader Pricing - is when a price is set below cost (this is a kind of penetration pricing really). Once the product has become established the firm will increase the price. This happens with new consumer products where existing products have brand loyalty - magazines are a good example.
  • Price Skimming - is the opposite of penetration pricing. Firms charge a high price to begin with - this helps make the product desirable to people with large incomes. When the product has become established the firm will…

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