Pricing Strategies

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Pricing

Pricing Strategies

  1. Penetration pricing - This strategy is used to establish or increase a market share.

  2. Cost plus pricing - This strategy creates a selling price by taking the cost of a product and adding on a profit mark up.

    Marginal cost plus pricing is an example of cost plus pricing. This strategy creates a selling price by taking the marginal (variable cost of a product and adding on a profit mark up.

    In all types of cost plus pricing - market demand and conditions are not taken into account.

  3. Market skimming - This strategy sets an initially high price for a new product to take advantage of those who are willing to pay for it at that high price. 

    Then once everyone who is willing to pay the high price has paid it, the price is reduced.

  4. Price discrimination - This strategy charges different prices to different customers for the same service. It is used to manage demand.

  5. Perceived quality pricing - Charge high price so customers think of it as a high quality product/service.

  6. Going rate pricing - Match the prices with that of competitors.

  7. Dynamic pricing - Change prices with the change in demand. High demand means high prices and low demand means low prices.

  8. Loss leaders - Sell one product at a loss with the expectation that customers will buy other profitable products

  9. Captive product pricing - Offer one product at a lower price. Once the customer is captive, sell the other one at a higher price.

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