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Assess two pricing strategies Richard could use at Northfield Cycles. - Edexcel - A-Level Business - Question 2 - 2022 - Paper 3
Question 2
Assess two pricing strategies Richard could use at Northfield Cycles.
Worked Solution & Example Answer:Assess two pricing strategies Richard could use at Northfield Cycles. - Edexcel - A-Level Business - Question 2 - 2022 - Paper 3
Step 1
Pricing Strategy 1: Penetration Pricing
Answer
Richard could implement a penetration pricing strategy to attract new customers. This involves setting lower prices initially to capture a larger market share. Given that Northfield Cycles offers a variety of bikes priced between £90 and £24,000, setting competitive prices could entice customers who are price-sensitive. By gradually increasing prices once a loyal customer base is established, this method could lead to long-term profitability.
Step 2
Pricing Strategy 2: Price Skimming
Answer
Another strategy Richard could consider is price skimming. This involves setting high prices for new or premium products, allowing Northfield Cycles to maximize revenue from customers willing to pay more. As the demand from this segment decreases, prices can be lowered to attract more price-sensitive customers. This approach can be particularly effective for high-end brands or specialized bikes, leveraging the perceived value to justify the higher initial price.