This document discusses pricing strategies that businesses can use when setting prices. It describes pricing strategies as either cost-based like cost-plus pricing, competition-based by following competitors' prices, or market-led like penetration pricing or price skimming. Cost-plus pricing sets price as a percentage markup over costs, while floor pricing aims for high volume sales with low margins. Penetration pricing uses low initial prices to gain market share, while price skimming charges high initial prices for innovative products to recover costs before lowering prices with more competition. The proper pricing strategy depends on factors like the product, place, and promotion.

1. How much is it?
Presentation on Price

2. What are we talking about?
• Pricing decision
• Strategies

3. Who is making the decision?
Price Maker
• Strong Market Power
• Great position
• Ability to set price
Price taker
• Not powerful
• Passively accept the price
• Exist competitive markets
with low barriers
BUT every business has to make their own pricing strategy

4. Pricing Strategies
• Cost-based pricing
– Cost-plus pricing
– floor pricing
• Competition-based pricing
• Market-led pricing

5. Cost-plus
• Price = cost of production + k% * profit
• Add a percentage of predetermined profit to
the average cost of production to determine
the selling price.
• mark-up or profit margin

6. Floor
• A very low price is set to appeal to the price-
sensitive customer
• Survive on very low profit margins by selling in
huge volumes
• 薄利多销

7. Competition-based pricing
• prices charged by its rivals
• Price leadership
– bestselling products or brands
– few substitutes
– Price takers follow the leader

8. Market-led pricing strategies
• the level of demand for a firm's products
• Penetration pricing
• Skimming pricing

9. Penetration pricing
• Set a relatively low price to gain brand
recognition and market share
– large enough volumes to sustain low profit
margins
– high price elasticity of demand
• high Demand
• May be considered inferior

10. Price skimming
• technologically advanced and innovative
products
• High price initially
• Create an positive image
• When there is few substitutes
• Lowering price later, when the fixed costs are
paid and more competition involves

11. penetration vs. skimming
Price
Time
Price
Time

12. How to work out the proper strategy
• Place
• Product
• Promotion