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Pricing Strategies Guide for Teachers

The document provides examples of different pricing strategies that businesses use: 1) Cost plus pricing adds a percentage onto production costs to ensure a profit margin. For example, adding 50% to a product that costs £1 to make so it sells for £1.50. 2) Penetration pricing sets a lower initial price to attract customers and gain market share before eventually raising prices. For example, Aero bars sold at 99p instead of £1.50 to attract buyers. 3) Competition pricing matches competitors' prices to remain competitive in the market. For example, supermarkets lowering petrol prices when others do.

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Ajeet Bhatt
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64 views2 pages

Pricing Strategies Guide for Teachers

The document provides examples of different pricing strategies that businesses use: 1) Cost plus pricing adds a percentage onto production costs to ensure a profit margin. For example, adding 50% to a product that costs £1 to make so it sells for £1.50. 2) Penetration pricing sets a lower initial price to attract customers and gain market share before eventually raising prices. For example, Aero bars sold at 99p instead of £1.50 to attract buyers. 3) Competition pricing matches competitors' prices to remain competitive in the market. For example, supermarkets lowering petrol prices when others do.

Uploaded by

Ajeet Bhatt
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Business Level 2

Unit 5 – The Marketing Plan

Pricing strategies in business


Instructions and answers for Teachers
These instructions should accompany the OCR resource ‘Pricing strategies in business’
which supports the OCR Level 2 Cambridge Technicals in Business Unit 5 – The Marketing
Plan.

Associated Files:
Pricing strategies in
business

Expected Duration:
Task – approx. 30 minutes

Businesses use a variety of different pricing techniques in order to encourage


consumers to purchase products and services which in turn will increase the
business profits.

Task
Complete the table on the following pages by providing an example for each pricing
strategy, along with an advantage and disadvantage for each.
pricing methods
Technique Definition Example Advantage Disadvantage
Cost of producing product is The business will definitely make There is no guarantee that the
Businesses add a percentage
£1.00. The business adds 50% some profit on every products will sell to consumers.
onto the actual cost of
on to the product making it product/service sold.
Cost Plus Pricing producing the product/service
£1.50 so they will make 50%
which will be PROFIT for the
profit eg 50p on the sale of
business.
each product.
Aero Mint biscuit bar was first The company will hope that The special offer prices can
A business will introduce a introduced at 99p for 5 instead consumers will be attracted to only last for a limited time
Penetration product/service at a lower of £1.50. purchase the product/service due before the business has to
Pricing price than the normal price to to its quality, taste etc and increase its prices to ensure
attract customers. continue to purchase once the profit is made.
price is increased.
A supermarket may decrease The prices mean that the business The profits of the business will
A business will charge a the price of petrol and then the will remain competitive to the decrease for a period of time
Competition
similar price to its immediate other supermarkets in direct competition. whilst this competition pricing
Pricing
competitors. competition may copy. takes place.
When the iphone was Ensures that high profits are made It will only last whilst there is no
This is when a business will introduced, Apple were the whilst competitors try to compete. other competition from other
have a unique product and be market leaders so could charge companies.
Price Skimming
able to charge a high price for what they wanted.
an amount of time.
A shop may offer cheaper By offering a promotion, the Businesses use this for a
A business will offer a products/services at the end of business would be able to ensure limited amount of time.
Promotional a season. that the excess stock left over
product/service for a special
Pricing from a season would be sold even
limited time.
at a reduced price.

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