Types of Pricing Strategies
- Choosing the right pricing strategy is essential for a business to be profitable, competitive, and successful in the long run
- By understanding their customers, competitors, and costs, businesses can set prices that maximise revenue and profitability
- Pricing can play a significant role in positioning the brand in the market and help a firm to compete effectively
Different types of pricing strategies
- Price is the only element of the marketing mix that relates directly to revenue and is vital to a business achieving its sales and marketing objectives
- Businesses need to select the most appropriate methods of pricing to ensure that they are able to make a profit whilst meeting the needs and expectations of customers
- A business may use more than one method of pricing across its product range
- E.g. a large supermarket may offer premium-priced product ranges alongside a selection of loss leaders
- E.g. a large supermarket may offer premium-priced product ranges alongside a selection of loss leaders
- A business may use more than one method of pricing across its product range
An Explanation of Pricing Strategies
Pricing Strategy |
Explanation |
Advantages |
Disadvantages |
Cost plus |
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Penetration |
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|
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Loss Leader |
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|
|
|
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Premium |
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Exam Tip
Exam questions frequently ask you to be able to justify the most appropriate pricing strategy. When studying the data provided, consider the points in the table above and then make a recommendation.
For example, in launching a new product into a competitive market, it may be appropriate to use a penetration pricing strategy to attract customers and encourage them to switch brand in order to gain sales and market share quickly.