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Pricing Strategies

Cost Plus Pricing

It involves estimating how many of the product will be produced, then calculating the total cost of producing this output and finally adding a percentage mark-up for profit.

(Total Cost/Output)* % mark-up=Selling price

Penetration Pricing

Involves setting the price lower than the competitors’ prices. This strategy is usually followed where there is a lot of competition and the product launched may not be unique.

Price Skimming

This is where the product is launched at a premium price. It is common with products which are a new invention and people are willing to pay a premium price because of the novelty factors. It is quite common with Mobile phones and other technological products.

Competitive Pricing

It involves setting the prices in line with the competitors’ price or just below their prices.

Promotional Pricing

It involves reducing the price of product for a limited period of time. Summer sales are an example of Promotional pricing.

 

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