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Pricing Strategies

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Pricing Strategies
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Pricing Strategies

Copyright 2006 – Biz/ed

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Pricing Strategies

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Penetration Pricing

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Penetration Pricing
• Price set to ‘penetrate the market’
• ‘Low’ price to secure high volumes
• Typical in mass market products – chocolate bars, food stuffs, household goods, etc.
• Suitable for products with long anticipated life cycles
• May be useful if launching into a new market Copyright 2006 – Biz/ed

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Market Skimming

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Market Skimming

Many are predicting a firesale in laptops as supply exceeds demand. • High price, Low volumes
• Skim the profit from the market • Suitable for products that have short life cycles or which will face competition at some point in the future (e.g. after a patent runs out)
• Examples include:
Playstation, jewellery, digital technology, new
DVDs, etc.

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Value Pricing

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Value Pricing
• Price set in accordance with customer perceptions about the value of the product/service • Examples include status products/exclusive products Companies may be able to set prices according to perceived value.
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Loss Leader

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Loss Leader
• Goods/services deliberately sold below cost to encourage sales elsewhere
• Typical in supermarkets, e.g. at
Christmas, selling bottles of gin at £3 in the hope that people will be attracted to the store and buy other things
• Purchases of other items more than covers ‘loss’ on item sold
• e.g. ‘Free’ mobile phone when taking on contract package
Copyright 2006 –
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