Cost-plus Pricing – A markup is added to the cost price to ensure a profit

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

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William Anderson (Schoolworkhelper Editorial Team)
William completed his Bachelor of Science and Master of Arts in 2013. He current serves as a lecturer, tutor and freelance writer. In his spare time, he enjoys reading, walking his dog and parasailing. Article last reviewed: 2022 | St. Rosemary Institution © 2010-2024 | Creative Commons 4.0

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