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Explain four pricing policies that businesses can adopt as part of their marketing strategy and apply one of them to a product of your choice. - Leaving Cert Business - Question A - 2007
Question A
Explain four pricing policies that businesses can adopt as part of their marketing strategy and apply one of them to a product of your choice.
Worked Solution & Example Answer:Explain four pricing policies that businesses can adopt as part of their marketing strategy and apply one of them to a product of your choice. - Leaving Cert Business - Question A - 2007
Step 1
Explain Strategic Pricing
Answer
Strategic pricing focuses on the broader market landscape, aligning prices with market trends and competitor pricing strategies. This method requires a deep understanding of market conditions, consumer behavior, and competitors. Businesses can opt for strategies like price skimming or geographical pricing to maximize their market position.
Step 2
Explain Cost Plus Pricing
Answer
Cost plus pricing is a straightforward method where a business calculates the total cost of producing a product (fixed and variable costs) and then adds a markup percentage to determine the selling price. This approach ensures that all costs are covered and a profit margin is achieved, making it a reliable pricing strategy.
Step 3
Explain Market Share Pricing (Penetration Pricing)
Answer
Market share pricing, also known as penetration pricing, involves setting a low initial price for a new product to attract customers quickly and gain market share. This strategy can create customer loyalty and discourage competitors from entering the market. Once a substantial market share is gained, the price may be increased.
Step 4
Explain Premium Pricing
Answer
Premium pricing involves setting prices higher than the competition to create a perception of higher quality or luxury. This strategy targets customers who are willing to pay more for perceived superior value, enhancing the brand's prestige and generating higher profit margins.
Step 5
Apply one of the pricing policies to a product of your choice
Answer
For example, if we consider a new organic skincare line, applying the Premium Pricing strategy would be appropriate. By setting a higher price point, the brand can position itself as a luxury product, emphasizing natural ingredients and high-quality production. This strategy can attract a market segment that values quality over cost, enhancing the brand's reputation and profitability.