This document discusses various pricing strategies that companies use in marketing. It outlines strategies such as low pricing to attract customers, high pricing for luxury goods, promotional pricing for limited time deals, cost-plus pricing to cover costs and make a profit, and psychological pricing slightly below a round number to seem lower. Other strategies covered are loss leaders where one product is priced very low to attract customers to the store, penetration pricing to boost new product sales before raising price, and skimming to start with a high price for attention then gradually lower it.

1. MMaarrkkeettiinngg MMiixx
PRICE

2. PPRRIICCIINNGG SSTTRRAATTEEGGIIEESS
Low price – (long-term) The prices are kept lower than the
competitor's.
◦ The cheap prices make the company more attractive to consumers.
◦ Example: Poundstretcher offer everything at a cheap price, hence
having many customers.
High price – (long term) The prices are kept intentionally
higher than the competitor's.
◦ Companies who sell luxury items will use this tactic to give the
perception of quality to consumers.
◦ Example: Gucci clothing is priced for high end of the market rather
than the mass market.

3. PPRRIICCIINNGG SSTTRRAATTEEGGIIEESS
Promotional pricing – (short term) companies will offer
special prices for a limited time.
◦ Customers will buy the product because they believe they are getting
a great deal.
◦ Example: The local Co-op store offering Buy One Get One Free
(BOGOF)
Cost-plus pricing – (long term) A mark-up (%) is added to
the average cost of the products.
o Companies in non-competitive markets will use this tactic as it
ensures their costs are covered and they gain a steady profit.
o Example: A sandwich business like The Filling Station in Longniddry
might use this strategy.

4. PPRRIICCIINNGG SSTTRRAATTEEGGIIEESS
Psychological Pricing – (short term) The price charged is
slightly lower than a round number
This strategy makes customers think they are paying less than it
actually is. Usually has an impact on impulse buyers.
Example: Supermarkets sometimes price products at £1.95.
Consumers think they are only paying £1 when in fact they are paying
closer to £2.
Loss leaders – (short term) A product will be advertised at
a very low price for a limited time.
This strategy is usually used by supermarkets to entice consumers into
the shop. The hope consumers will by additional items while in store.
Example: Supermarkets may price the latest big title DVD at a
ridiculously low price. The hope is consumers might buy popcorn etc.
while they are there.

5. PPRRIICCIINNGG SSTTRRAATTEEGGIIEESS
Penetration pricing – (short-term) companies set a low
price to boost sales when a new product is launched. The
price is then raised once the firm’s main objective of growth
has been achieved.
◦ The hope is that this strategy will encourage loyalty to the product
while it priced low. As the price rises the consumer hopefully stays
with the product.
◦ Example: Cadburys introduce Chocolate Popcorn to the market and
price it at £1 to entice consumers to give it a try.
Skimming or creaming – (short-term) companies start
with a high price to catch the customers attention and then
gradually drop the price as demand falls.
◦ Companies can maximise profits by providing “must have” products
which some consumers will be willing to pay despite the price.
◦ Example: Usually used in the electronics industry. The latest product
from Apple usually starts high and the price drops as interest fades to
retain market share.

6. PPRRIICCIINNGG SSTTRRAATTEEGGIIEESS
Competitive pricing – (long term) where firms
will match the prices of rival companies.
Companies will do this because they wish to retain their
competitive edge and keep their customers.
Example: Companies selling petrol usually all lower their
price at the same time, usually started by the
supermarkets.
Destroyer pricing – (short term) companies will
set their prices as low as possible to drive
competitors prices down.
◦ This strategy is used with the aim of scaring rivals out of
the market. Prices will rise in due course.
◦ Example: Rupert Murdoch’s News Corporation has tried
this with its newspapers; The Times and The Sun by
offering them at 10p

7. PPRRIICCIINNGG SSTTRRAATTEEGGIIEESS
Competitive pricing – (long term) where firms
will match the prices of rival companies.
Companies will do this because they wish to retain their
competitive edge and keep their customers.
Example: Companies selling petrol usually all lower their
price at the same time, usually started by the
supermarkets.
Destroyer pricing – (short term) companies will
set their prices as low as possible to drive
competitors prices down.
◦ This strategy is used with the aim of scaring rivals out of
the market. Prices will rise in due course.
◦ Example: Rupert Murdoch’s News Corporation has tried
this with its newspapers; The Times and The Sun by
offering them at 10p