Pricing Strategies

HideShow resource information
Price Wars
If M&S cut their prices Waitrose would also then cut their prices in order to not lose revenue and market share. However Price Wars can continue until neither firm was making significant profits forcing prices to then rise
1 of 9
Cost-plus Pricing
The most common method businesses use to set prices is to work out their average cost and then add a mark up on of this
2 of 9
Contribution Pricing
Setting a price based on the variable costs of producing the product, any price which is above the variable cost goes towards paying off the fixed costs. In the long run to make a profit this would have to be equal to or above the average costs
3 of 9
Contribution Pricing
Setting a price based on the variable costs of producing the product, any price which is above the variable cost goes towards paying off the fixed costs. In the long run to make a profit this would have to be equal to or above the average costs
4 of 9
Penetration Pricing
The use of a low price to launch a new product into the market to establish a brand for the product until there is customer loyalty and the product is more price inelastic
5 of 9
Predatory Pricing
Where fims (generally monopolists) set the price below the average variable costs in order to drive a rival firm out of the market. This is illegal under UK and EU trade law
6 of 9
Limit Pricing
Set by a monopolist to discourage new firms from entering the market as it may have cost advantage over economies of scale. This prevents whereas predatory pricing forces.
7 of 9
Contribution Pricing
Setting a price based on the variable costs of producing the product, any price which is above the variable cost goes towards paying off the fixed costs. In the long run to make a profit this would have to be equal to or above the average costs
8 of 9
Non-Price Competition
To gain Market Control for oligopoly and monopolistic firms there are methods such as; loyalty cards, advertising, free gifts, sales staff and differentiating products
9 of 9

Other cards in this set

Card 2

Front

The most common method businesses use to set prices is to work out their average cost and then add a mark up on of this

Back

Cost-plus Pricing

Card 3

Front

Setting a price based on the variable costs of producing the product, any price which is above the variable cost goes towards paying off the fixed costs. In the long run to make a profit this would have to be equal to or above the average costs

Back

Preview of the back of card 3

Card 4

Front

Setting a price based on the variable costs of producing the product, any price which is above the variable cost goes towards paying off the fixed costs. In the long run to make a profit this would have to be equal to or above the average costs

Back

Preview of the back of card 4

Card 5

Front

The use of a low price to launch a new product into the market to establish a brand for the product until there is customer loyalty and the product is more price inelastic

Back

Preview of the back of card 5
View more cards

Comments

No comments have yet been made

Similar Economics resources:

See all Economics resources »See all The company, revenue and costs resources »