17th April 2007

In this class Keith explained the Pricing strategies :

• Penetration pricing: When we throw a new product we can choose between two strategies of penetration: under price or high volume.The low prices to secure how volume the sales. May be useful if launching into a new market. Is typical in mass market products: chocolate bars, foos stuffs, household goods....

• Market skimming : High price/low volume. Skim the profit the market. Suitable for products that have short life cycles or which will face competition at some point in the future, example: playstation , digital technology…

• Value Pricing: price based on consumer perception. Price set in accordance with customer perceptions about the value of the product or service. Examples include status products/exclusive products como BMW

• Loss Leader: sold below cost to attract saes elsewhere. Goods or services deliberately sold below cost to encourage sales elsewhere. For example: ‘Free’ mobile phone when taking on contract package

• Psychological Pricing: used to play on costumer perceptions. Classical example is 9,99£. instead of 10, 99 £. Links with value pricing: high value goods prices according to what consumers think should be the price.

• Going Rate: price leadership. 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 market.

• Tender Pricing: Many contracts awarded on a tender basis. Firm submit their price for carrying out the work. Purchaser then chooses which represents best value. Mostly done in secret

• Price Discrimination: Charging a different price for the same good/service in different markets. Example: bus

• Destroyer/predatory Pricing: aims to force out competitor. Deliberate price cutting or offer of ‘free gifts/products’ to force rivals out of business or prevent new entrants. Example: microsoft

• Absorption/full Cost Pricing: Full Cost Pricing – attempting to set price to cover both fixed and variable costs. And Absorption Cost Pricing – Price set to ‘absorb’ some of the fixed costs of production.

• Marginal Cost Pricing: set price in relation to Marginal Cost

• Contribution Pricing: Contribution = Selling Price – Variable (direct costs). Prices set to ensure coverage of variable costs and a ‘contribution’ to the fixed costs

• Target Pricing: target level of profit. Setting price to ‘target’ a specified profit level.Estimates of the cost and potential revenue at different prices, and thus the break-even have to be made, to determine the mark-up

• Cost-plus Pricing: calculation of average cost plus a mark up. AC= total cost/output

• Influence of Elasticity: price inelastic or price elastic.

After the explanation on the strategies of prices, Keith put a video of which we did a few exercises. In them we had to find the failures of some written words.

Finally, we did the exercises of the paragraph 3.3 of the blog on prefixes and suffixes.