Cambridge IGCSE Business Studies 3.3 Marketing mix

3.3.2 Price

Pricing Methods

• Cost plus pricing – Cost of producing the product plus a profit

+Method is easy 

-Lose sales if the selling price is a lot higher than your competitor’s price 

• Competitive pricing – Product priced similarly to or just below the competitor’s price

+Sales are likely to be high as the price is competitive

-Researching your competitor’s prices can take time

• Psychological pricing 

1. Charging high prices for a high-quality product so consumers purchase it as a status symbol
2. Prices just below a whole number ($1.99)
3. Charge low prices for some items to attract customers into the store

• Penetration pricing – Low price for a new product in order to attract customers from existing competitor’s products.

+Useful if launching product to a new market

+ Ensures product will be sold so the product enters the market

• Price Skimming – High price is set for a new product on the market

+Can make people think product is good quality because it’s expensive

– Consumers may not buy the product because they think its overpriced

• Promotional pricing – Product sold at a low price for a short period of time.

+Useful when clearing old stock that doesn’t get sold

+ Promotes the business

– Low sales revenue as prices are low