Pricing Strategies

Pricing Strategies

When companies are considering what price to charge, in the first instance they usually consider these things.

• Costs
• Market demand i.e. what customers will pay
• behaviour of competition

For Profits

• Pricing at profit-maximising level
• Price discrimination
• Smart-pricing (1st degree price discrimination)

For growth

• Revenue maximisation - MR = 0
• Sales maximisation - price = AR = MC

For new products

• Creaming/skimming - taking the best bit off first e.g. in technology, products are usually introduced at a very high price so firms can capitalise on those willing to pay before lowering it to a price more suitable for a mass market
• Penetration pricing - often used for repeat purchase products requiring brand loyalty, this involves introducing at a…