Pricing Strategy

Pricing strategy refers to the approach adopted by the seller in determining their market pricing. The simplest pricing strategy is cost plus pricing, which involves calculating costs and adding on a margin for profit. However, as the identification of product or service costs involves multiple choices, such as the way in which overheads are apportioned, even this approach is not as simple as it may seem. There are many other pricing strategies, from penetration pricing, loss leader pricing, predatory pricing, target pricing, marginal cost pricing to ‘freemium’ pricing. All these examples are discounted pricing strategies, and may be used at different times in the product or service life cycle. Premium pricing strategies may include skimming, value-based pricing, and total absorption pricing. See also Life Cycle, Product, Overhead Allocation and Price.