GCSE-readyPrice
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Price affects sales, revenue and how customers see a product. Businesses choose a pricing strategy to suit their situation.
Pricing strategies
Influences on price
Technology: online comparison makes customers price-aware; new tech can lower costs.
Competition: more rivals means less freedom to charge high prices.
Market segments: luxury segments accept higher prices; budget segments need low ones.
Product life cycle: skimming at launch, lower prices in decline.
Competition: more rivals means less freedom to charge high prices.
Market segments: luxury segments accept higher prices; budget segments need low ones.
Product life cycle: skimming at launch, lower prices in decline.
Cost-plus example
A candle costs £4 to make. The business adds 50%.
50% of £4 = £2. Price = 4 + 2 = £6.
50% of £4 = £2. Price = 4 + 2 = £6.
A phone costs £300 to make. The firm uses cost-plus pricing with a 40% mark-up. What is the price?
- 40% of 300 = 120
- 300 + 120
Answer: £420
Strategies: cost-plus, penetration, skimming, competitive and promotional pricing. Price is influenced by technology, competition, market segments and the product life cycle.
The interactive lesson includes the diagrams for this topic.
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