There are seven main strategies I will be looking at and comparing which one is best for my business and when.
Penetration pricing: This is when a price is set low when the product is new to get consumers interested. When the price is below cost it’s called a lost leader. Once this product has become established the firm will increase the price. This happens with new consumer products where existing products have brand loyalty- e.g. magazines. I might use this method when I first set up as I will price my new products low to attract costumers and my business will gain economies of scales which help it keep the price low. The low price will hopefully gain a high market share.
Skimming: Is the opposite of penetration instead you price a new, unique product at a high cost to begin with, this is done to make it more desirable for people with high incomes. The early market leader enables the price to be high because there is no competition with that product; once the product becomes known with competitors then the firm can lower the price and get more consumers because of the lower price. This is a great method to use but I will not use this method as I don’t think I can compete with the big firms with getting the newest products before them.
Competitor pricing: This is when a business looks at its competitors prices and then has an idea of how to charge their products. I will deiffently be using this method when I first start my business as it’s a good way of getting a new business started after I see my competitors prices I will charge a little less and may then use penetration pricing.
Cost plus pricing: This is when the business looks at its total cost(fixed + variable cost) and add the profit they would like to make, and that will be the cost but also depending on other aspects like the supply and demand then the business will add a bit more on the price if they think consumers will pay. The problem with this is that competitor’s prices might be lower but I will be doing this as it’s a good way of making sure I will make a profit if I sell the amount I need to.
consumers for the same product e.g cheaper rail tickets for OAP’s. I will not be using this method as I don’t think it’s appropriate for my products and my business and unfair.
Promotional pricing: This method is when you reduce a price to either attract consumers with the low prices and to get rid of old stock during a sale for room for the new stock or a boost for more profits this will help the business. I will be using this method as it’s a great way to increase sales when business is failing also when I will be receiving new stock at the beginning of a new year or at times of needs of a sale. Also it’s a good way to encourage new consumers to come into the store e.g. two for the price of one
Psychological pricing: This method is very popular and I will be using this it’s a clever way of making consumers they are saving money instead its usually only a couple of pennies they do this buy pricing products below a significant whole number e.g. £9.95 rather £10.00. Unlike the other strategies I’m going to use this method all the time as its an easy quick method.
Here's what a star student thought of this essay
Quality of writing
The spelling and grammar in this essay was perfect. The layout was good as each method was titled, so as to make it clear what each paragraph was about. This essay has received five stars as it answers the question well, with a good level of analysis.
Level of analysis
The explanation in this essay is textbook, as in perfect. The author also uses good analysis when he/she explains which one they would use for their business and why. In business studies this is the easiest way of bring analysis into an essay, as you weigh up the pros and cons of each strategy. The level of explanation is improved further by the use of examples for instance the OAPs and Cost-Plus pricing. The essay could have been improved by the use of short conclusion, just to make it clear which strategy they would use.
Response to question
This essay clearly answers the question well, by describing what price is and how it relates to the four Ps. They also take the response to another level by explaining types of pricing strategy. The author also helps to make it clear to the author what they are doing: Ã¢â‚¬ËœThere are seven main strategies I will be looking at and comparing which one is best for my business and when.Ã¢â‚¬â„¢ This is a good thing to do in any essay, as it lets the reader know what you are going to do.