Have you ever wondered if there was some reason behind a business pricing a product or service? Many books have been written about it and  economists say there’s a science behind it. Here’s the top 15 pricing strategies:

  1. Penetration Pricing  – Low Price/High Volume, e.g. Walmart
  2. Market Skimming – High Price/ Low Volume, e.g. Tiffany’s
  3. Cost-Plus Pricing  – Cost plus Mark-up, e.g. retail
  4. Target Pricing – Target level of Profit, e.g. restaurants at 35%
  5. Value Pricing- Price based on Consumer Perception, e.g. Mercedes
  6. Loss Leader – Sold below cost to make sales elsewhere, e.g. IKEA hotdog & drink $1.50
  7. Psychological Pricing -Significantly lower than reality, e.g. $9.99
  8. Going Rate -Prices set following lead of rivals, e.g. gas stations
  9. Tender Pricing – Bids for jobs, e.g. government
  10. Marginal Cost Pricing – Set price in relation to Marginal Cost
  11. Price Discrimination – Different price, same good or service, e.g. online/store
  12. Contribution Pricing -Variable/Direct Costs + contribution to Fixed Assets
  13. Absorption/Full cost Pricing – Set price to cover both Variable and Fixed costs, e.g. exporter
  14. Influence of Elasticity – Inelastic, e.g. raise price if it doesn’t make much difference /or Elastic, e.g. low computer prices= more buyers

…and my favourite

  1. Predatory Pricing – Kills the competition-lower the price until you put the competition out of business
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  1. A couple more…

    Dartboard Pricing – the price is whatever number the dart hits

    Fruit Salad Pricing – just throw everything in, and hope it tastes good

    …and my personal favourite…

    Bon Voyage Pricing – set the price, then “smile and wave boys, smile and wave”

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