http:/www.bized.ac.ukCopyright 2006 Biz/edPricing Strategieshttp:/www.bized.ac.ukCopyright 2006 Biz/edPricing Strategieshttp:/www.bized.ac.ukCopyright 2006 Biz/edPenetration Pricinghttp:/www.bized.ac.ukCopyright 2006 Biz/edPenetration PricingPrice set to penetrate the marketLow price to secure high volumesTypical in mass market products chocolate bars, food stuffs, household goods, etc.Suitable for products with long anticipated life cyclesMay be useful if launching into a new markethttp:/www.bized.ac.ukCopyright 2006 Biz/edMarket Skimminghttp:/www.bized.ac.ukCopyright 2006 Biz/edMarket SkimmingHigh price, Low volumesSkim the profit from the marketSuitable for products that have short life cycles or which will face competition at some point in the future (e.g. after a patent runs out)Examples include: Playstation, jewellery, digital technology, new DVDs, etc.Many are predicting a firesale in laptops as supply exceeds demand.Copyright: iStock.comhttp:/www.bized.ac.ukCopyright 2006 Biz/edValue Pricinghttp:/www.bized.ac.ukCopyright 2006 Biz/edValue PricingPrice set in accordance with customer perceptions about the value of the product/serviceExamples include status products/exclusive products Companies may be able to set prices according to perceived value.Copyright: iStock.comhttp:/www.bized.ac.ukCopyright 2006 Biz/edLoss Leaderhttp:/www.bized.ac.ukCopyright 2006 Biz/edLoss LeaderGoods/services deliberately sold below cost to encourage sales elsewhereTypical in supermarkets, e.g. at Christmas, selling bottles of gin at 3 in the hope that people will be attracted to the store and buy other thingsPurchases of other items more than covers loss on item solde.g. Free mobile phone when taking on contract packagehttp:/www.bized.ac.ukCopyright 2006 Biz/edPsychological Pricinghttp:/www.bized.ac.ukCopyright 2006 Biz/edPsychological PricingUsed to play on consumer perceptionsClassic example - 9.99 instead of 10.99!Links with value pricing high value goods priced according to what consumers THINK should be the pricehttp:/www.bized.ac.ukCopyright 2006 Biz/edGoing Rate (Price Leadership)http:/www.bized.ac.ukCopyright 2006 Biz/edGoing Rate (Price Leadership)(时价)In case of price leader, rivals have difficulty in competing on price too high and they lose market share, too low and the price leader would match price and force smaller rival out of marketMay follow pricing leads of rivals especially where those rivals have a clear dominance of market shareWhere competition is limited, going rate pricing may be applicable banks, petrol, supermarkets, electrical goods find very similar prices in all outletshttp:/www.bized.ac.ukCopyright 2006 Biz/edTender Pricinghttp:/www.bized.ac.ukCopyright 2006 Biz/edTender PricingMany contracts awarded on a tender basisFirm (or firms) submit their price for carrying out the workPurchaser then chooses which represents best valueMostly done in secrethttp:/www.bized.ac.ukCopyright 2006 Biz/edPrice Discriminationhttp:/www.bized.ac.ukCopyright 2006 Biz/edPrice DiscriminationCharging a different price for the same good/service in different marketsRequires each market to be impenetrableRequires different price elasticity of demand in each marketPrices for rail travel differ for the same journey at different times of the dayCopyright: iStock.comhttp:/www.bized.ac.ukCopyright 2006 Biz/edDestroyer Pricing/Predatory Pricinghttp:/www.bized.ac.ukCopyright 2006 Biz/edDestroyer/Predatory PricingDeliberate price cutting or offer of free gifts/products to force rivals (normally smaller and weaker) out of business or prevent new entrantsAnti-competitive and illegal if it can be provedhttp:/www.bized.ac.ukCopyright 2006 Biz/edAbsorption/Full Cost Pricinghttp:/www.bized.ac.ukCopyright 2006 Biz/edAbsorption/Full Cost Pricing完全成本定价Full Cost Pricing attempting to set price to cover both fixed and variable costsAbsorption Cost Pricing Price set to absorb some of the fixed costs of productionhttp:/www.bized.ac.ukCopyright 2006 Biz/edMarginal Cost Pricinghttp:/www.bized.ac.ukCopyright 2006 Biz/edMarginal Cost PricingMarginal cost the cost of producing ONE extra or ONE fewer item of productionMC pricing allows flexibility Particularly relevant in transport where fixed costs may be relatively highAllows variable pricing structure e.g. on a flight from London to New York providing the cost of the extra passenger is covered, the price could be varied a good deal to attract customers and fill the aircraft如果边际贡献等于或超过固定成本，企业就可以保本或盈利。这种方法适用于产品供过于求、卖方竞争激烈的情况。在这种情况下，与其维持高价，导致产品滞销积压，丧失市场，不如以低价保持市场，不计固定成本，尽量维持生产。http:/www.bized.ac.ukCopyright 2006 Biz/edMarginal Cost PricingExample:Aircraft flying from Bristol to Edinburgh Total Cost (including normal profit) = 15,000 of which 13,000 is fixed cost*Number of seats = 160, average price = 93.75MC of each passenger = 2000/160 = 12.50If flight not full, better to offer passengers chance of flying at 12.50 and fill the seat than not fill it at all! *All figures are estimates onlyhttp:/www.bized.ac.ukCopyright 2006 Biz/edContribution Pricinghttp:/www.bized.ac.ukCopyright 2006 Biz/edContribution PricingContribution = Selling Price Variable (direct costs)Prices set to ensure coverage of variable costs and a contribution to the fixed costsSimilar in principle to marginal cost pricingBreak-even analysis might be useful in such circumstanceshttp:/www.bized.ac.ukCopyright 2006 Biz/edTarget Pricinghttp:/www.bized.ac.ukCopyright 2006 Biz/edTarget PricingSetting price to target a specified profit levelEstimates of the cost and potential revenue at different prices, and thus the break-even have to be made, to determine the mark-upMark-up = Profit/Cost x 100http:/www.bized.ac.ukCopyright 2006 Biz/edCost-Plus Pricing http:/www.bized.ac.ukCopyright 2006 Biz/edCost-Plus PricingCalculation of the average cost (AC) plus a mark upAC = Total Cost/Outputhttp:/www.bized.ac.ukCopyright 2006 Biz/edInfluence of Elasticityhttp:/www.bized.ac.ukCopyright 2006 Biz/edInfluence of ElasticityAny pricing decision must be mindful of the impact of price elasticity The degree of price elasticity impacts on the level of sales and hence revenueElasticity focuses on proportionate (percentage) changesPED = % Change in Quantity demanded/% Change in Pricehttp:/www.bized.ac.ukCopyright 2006 Biz/edInfluence of ElasticityPrice Inelastic:% change in Q % change in pricee.g. A 4% rise in price would lead to sales falling by something more than 4%Revenue would fallA 9% fall in price would lead to a rise in sales of something more than 9%Revenue would rise