Price Price determinations in free markets supply and demand pricing strategies.

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Presentation transcript:

Price Price determinations in free markets supply and demand pricing strategies

Factors that affect the demand Price of product Price of substitute products Price of complementary products Consumers` income Taste and fashion Advertising

Factors that affect the supply Price Wage rates Price of raw materials Taxes Improvements in technology Climate (agriculture)

Pricing strategies Cost-plus pricing: cover costs and ensure a profit Price skimming: make a high profit Penetration pricing: enter new markets Competitive pricing: to maintain a market share Promotional pricing: to increase sales Psychological pricing: to affect consumers´ perceptions of products

Exercise What pricing strategy would most probably be used for the following products? Explain! a)A watch that is very similar to other watches sold in the shops. b)A new type of radio that has been developed and is a lot higher quality than existing radios. c)A chocolate bar which has been on the market for several years and new brands are being brought out which are competing with it. d)A new brand of soap is launched (there are already many similar brands available).