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Price and Pricing Methods

Price and Pricing Methods. Price refers to the amount of money a customer is prepared to offer in exchange for a product. Cost based (mark-up) pricing is a pricing method derived from the cost of producing or purchasing a product then adding a mark up

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Price and Pricing Methods

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  1. Price and Pricing Methods Price refers to the amount of money a customer is prepared to offer in exchange for a product

  2. Cost based (mark-up) pricing is a pricing method derived from the cost of producing or purchasing a product then adding a mark up • Market-based pricing is a method of setting prices according to the interaction between the levels of supply and demand

  3. Competition-based pricing is where the price covers costs (cost of raw materials and the cost of operating the business) and is comparable to the competitor’s price. A business can select a price that is below, equal to or above that of the competitors • Once the basic price has been set using the preferred pricing method, the business then fin-tunes this price in line with it’s pricing strategy

  4. Price skimming, which occurs when a business charges the highest possible price for the product during the introduction stage of it’s life cycle e.g. sonny and Microsoft • Price for penetration, which occurs when a business charges the lowest price possible for a product or services so as to achieve a large market share

  5. Loss leader, which is a product sold at or below cost price. Although the business makes a loss on this product, it hopes that the extra customers will buy other products as well • Price points or (price lining) which is selling products only at a certain predetermined prices. manfactures set the price of the product, e.g. Golf price set

  6. Products of superior quality are sold at higher prices e.g French restaurant dish > McDonalds Meal • Prestige or premium pricing is a pricing strategy where a high price is charged to give the product an aura of quality and status e.g. First class tickets

  7. Pricing Strategies depend on • the businesses marketing objective • The life cycle of the product • The market for the product • The degree of product differentiation • The level of economic activity Bundle pricing is where customers gain A ‘package’ of goods and services in addition to the tangible good they purchased

  8. What are 3 main pricing Methods ? Identify 3 products at have been subject to price skimming within the market? How would the life cycle of the product, market for the product and level of economic activity affect the pricing strategy?

  9. By Jakoband Niels

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