Ben Bentley

                                

Pricing Strategy

I have previously worked out the prices of the products I am selling. I need to work out a pricing strategy. The cost plus pricing is fixing the price by adding a percentage profit margin to the cost of production. For example if you want to make a profit of 20% and you bought the item for €10 you will sell it for €12. The advantage of cost plus pricing is that it gives you your profit margin but the disadvantage is that it doesn’t take into account the variations in cost.

Another strategy is skimming. This is selling a product at a high price, sacrificing high sales in order to increase the profits.  For example Nike sells their products at extremely high prices and sacrifices those people that can’t afford the products. The advantage of skimming is guaranteed buyers from wealthy people at the beginning and normal people when the price is dropped. The disadvantage is that it isn’t in the mass market so it may not make the expected profit.

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A further pricing strategy is penetration pricing. This is setting the price for your product initially low to entice customers and then raise the price afterwards. The advantage of this is that by setting it at an initially low price it will promote the product. The disadvantage is that customers may decide not to buy the product now the price has been raised.

Another pricing policy is competitive pricing. This is when a firm sets its prices close to the competitors. Then the competition will be non-price related it would come down to the level of service. Price ...

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