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Chapter 11
2.3 Practical pricing methods
Method How it works When it’s best used
Penetration Starting low and increasing prices When repeat business is
as loyalty increased sought
Skimming Starting high and gradually reducing For sales that are likely to
prices be one-offs
Discrimination Charging different prices to different When segments can be
segments easily distinguished
Going rate Charging the same as rivals When there are lots of
homogeneous rivals
Perceived value Charging premium prices to reflect For differentiators
extra value
Periodic Having short-term reductions as To clear old inventory to
discounting certain periods of the year make way for new lines
Loss Selling one product in a range at a To attract customers to the
leaders/captive low price but making higher margins range
product on other products in the range
Bait Quoting the basic price for the Luxury products with
product without any typical add ons modular sales elements
Illustrations and further practice
Now read illustration 2 and try TYU 3.
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