![]() ![]() Strategy used for a new product to help establish itself in industry, involving setting a relatively low price to gain market share & brand awareness Based on level of customer demand for product/level of demand in industry in which firm operates.Competitors ‘follow the leader’ by establishing prices based on price set by market/price leader.Few substitutes in eye of customer Dominant firm can set its own prices.Strategy often used for best-selling products/brands.Does not primarily take into consideration costs of production/level of demand for products. ![]() Firm’s pricing strategies based on prices charged by its competitors.Little or no account is taken of what price is being charged by competitors Little attention paid to any investment that has taken place or is required. Price increases can be justified when costs riseĭifficulties with calculation of costs – in particular the indirect cost element.Ĭost increases can be passed onto the customer Lack of responsiveness to market demand (and to the price elasticity of demand). Suitable for business that can survive on very low profit margins by selling in huge volumes.Very low price set to appeal to price-sensitive customer.Similar strategy – Floor Pricing – Used for economy brands.Mark-up/Profit Margin: % or specified amount of profit.cost of production to determine selling price Adding %/predetermined amount of profit to avg.Price Takers: Firms that “take” the price given by others in the market High degree of market power & have ability to set its own price (within reason). ![]()
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