PRICE AND PRICING METHODS
Price refers to the amount of money a customer is
prepared to offer in exchange for a product
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Cost based (mark-up) pricing is a pricing method
derived from the cost of producing or purchasing
a product then adding a mark up
Market-based pricing is a method of setting
prices according to the interaction between the
levels of supply and demand
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Competition-based pricing is where the price
covers costs (cost of raw materials and the cost of
operating the business) and is comparable to the
competitor’s price. A business can select a price
that is below, equal to or above that of the
competitors
Once the basic price has been set using the
preferred pricing method, the business then fintunes this price in line with it’s pricing strategy
Price skimming, which occurs when a business
charges the highest possible price for the product
during the introduction stage of it’s life cycle e.g.
sonny and Microsoft
 Price for penetration, which occurs when a
business charges the lowest price possible for a
product or services so as to achieve a large
market share
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Loss leader, which is a product sold at or below cost
price. Although the business makes a loss on this
product, it hopes that the extra customers will buy
other products as well
Price points or (price lining) which is selling products
only at a certain predetermined prices. manfactures
set the price of the product, e.g. Golf price set
Products of superior quality are sold at higher
prices e.g French restaurant dish > Mc Donalds
Meal
 Prestige or premium pricing is a pricing strategy
where a high price is charged to give the product
an aura of quality and status e.g. First class
tickets
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PRICING STRATEGIES DEPEND ON
the businesses marketing objective
 The life cycle of the product
 The market for the product
 The degree of product differentiation
 The level of economic activity
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Bundle pricing is where customers gain
A ‘package’ of goods and services in addition
to the tangible good they purchased
What are 3 main pricing Methods ?
Identify 3 products at have been
subject to price skimming within
the market?
How would the life cycle of the product, market for the product
and level of economic activity affect the pricing strategy?
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By Jakob and Niels