Cost-plus Pricing – A markup is added to the cost price to ensure a profit
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Markup = selling price – cost price
Markup % = selling price – (cost price/cost) X 100
Follow-the-competition Pricing – The price of the product or service is set equal to or slightly below a competitor’s price. The pricing can increase market share, but it is important to be aware of your operating costs so you do not set a price that will result in a loss.
Penetration Pricing – A new product or service is priced significantly below a competitor’s price. This pricing allows the newcomer to win market share from the competition and attract new customers. Selling large volumes at low prices can result in significant profits.
Skimming – When there is no competition, a new product or service can enter the market with a high price. This situation may result in short-term profits, but these profits will drop when competition moves in.
Psychological/Odd Number Pricing – Prices are chosen to give the impression that they are less than they actually are. An example might be pricing a product at $299.99 instead of $300.00.
Loss-leader Pricing – Selected products or services are sold at cost or less than cost to attract customers who will then make other purchases to compensate for the loss of profits.
Opportunistic Pricing – Pricing a product or service which takes an advantage of a given situation.
Price Taker – Sellers who must take the market price in order to sell their product
Discount/Promotional Pricing – Pricing strategy used to move merchandise off shelves and/or attract consumers into store in the hopes they will buy something else while they are there.
Variable/Differential Pricing – Pricing a product or service to different market segments. Example: Business Class Airline ticket- $500 Economy Class Airline ticket- $200