Pricing strategies
Pricing strategies
A pricing strategy is the overall approach a business takes to choosing its price. It is not the same as calculating an exact price; the strategy is the thinking behind the price: is it set to match what rivals charge, to appear lower than a round amount, to launch high, or to launch low?
| Strategy | The approach behind the price |
|---|---|
| Competitive pricing | The price is set close to the prices charged by rival businesses. |
| Psychological pricing | The price is placed just below a round amount so it appears lower than the round amount. |
| Price skimming | The price starts high at launch and is reduced over time. |
| Price penetration | The price starts low at launch and is increased over time. |
What is not a pricing strategy
A free gift with every purchase, a prize draw to win concert tickets or a loyalty card that gives a free drink after ten stamps are all sales promotions, not pricing strategies. A sales promotion is an incentive used to attract customers, often for a limited period, whereas a pricing strategy is the approach the business takes to setting the price in the first place.
When naming a pricing strategy, use one of the four above; a sales promotion is a different marketing method and will not match the question.
Practise this
Cambridge National Enterprise & Marketing · 4.10 Pricing strategies