Marketing Mix

Skimming
Price skimming involves charging a high price initially, and then lowering the
price over time. It is used when a business has a unique product, for which
some consumers are willing to pay a high initial price. For example, a new
mobile phone handset is usually launched with a high initial price, with the
price falling as competitors update and launch their latest models. This pricing
strategy can only be used for a short-time period, whilst the product is unique.

Cost-plus pricing
Many businesses will consider their costs when setting their prices. Cost-plus
pricing involves working out the cost per unit of producing a product, before
adding a percentage for the profit they are looking to make.

Penetration pricing
In competitive markets, where there are many competitors, a business may
decide to launch a product with a very low price, sometimes called a launch
price, or introductory offer, in order to encourage consumers to try it. After the
initial launch period, the price is then increased making this a short-term
pricing strategy. It is called penetration pricing as it is designed to help a new
product penetrate, or become known, within the market.

Competitor pricing
Competitor, or competitive pricing, involves setting prices based upon what
competitors are charging for similar or identical products. Doing this means
that a business can be confident that consumers are willing to pay the set price,
but it usually means that the market is sensitive to changes in price.

Loss leader pricing

Another short-term pricing policy, promotional pricing can be used as part of a
promotional campaign, designed to increase sales, or as part of a sale that is
designed to sell old stock in order to make way for new product ranges.