IGCSE Business Studies: Marketing Mix - Pricing Methods

Overview of Pricing Methods

• Cost Plus Pricing
• Competitive Pricing
• Penetration Pricing
• Price Skimming
• Promotional Pricing

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1. Cost Plus Pricing

• Definition:
  • Based on production costs plus a profit markup.
• Advantages:
  • Convenient and easy to use.
• Disadvantages:
  • May lose sales if selling price is significantly higher than competitors' prices.

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2. Competitive Pricing

• Definition:
  • Price set similarly to or just below competitors' prices.
• Advantages:
  • Likely to result in high sales due to competitive pricing.
• Disadvantages:
  • Time-consuming and potentially expensive market research needed to monitor competitors' prices.

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3. Penetration Pricing

• Definition:
  • Low introductory price for a new product to attract customers from competitors.
• Advantages:
  • Effective for launching new products in new markets.
  • Ensures product entry into the market.
• Disadvantages:
  • Low price may lead consumers to perceive the product as cheap or low quality.

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4. Price Skimming

• Definition:
  • High initial price for a new product that decreases over time.
  • Example: Apple phones at launch.
• Advantages:
  • Creates perception of high quality due to high pricing.
• Disadvantages:
  • May deter consumers who view the product as overpriced.

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5. Promotional Pricing

• Definition:
  • Low price for a limited time to clear old stock.
• Advantages:
  • Reduces inventory costs and promotes efficiency in business.
• Disadvantages:
  • Low sales revenue due to reduced prices affecting profit margins.

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Conclusion

• Summarized key pricing methods and their implications for business strategy.
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