Pearson Edexcel · GCSE · Business
Course version: 1BS0 · Version from Sept 2017
Price ● pricing strategies ● influences on pricing strategies: technology,…
Full specification wording
Price: Price ● pricing strategies ● influences on pricing strategies: technology, competition, market segments, product life cycle.
Pricing strategies determine how much a business charges.
Checked against the Pearson Edexcel 1BS0 specification (opens in a new tab) on .
Study notes
From the checked teaching notes for this specification point.
The idea
Pricing strategies determine how much a business charges. Common strategies include price skimming (high initial price for novel products), penetration pricing (low initial price to gain market share), cost-plus, competitive, and promotional pricing. Businesses must adapt pricing based on key influences. Technology enables dynamic pricing and easy price comparison, forcing firms to stay competitive. The level of competition dictates whether a business is a price maker or taker. Market segments strongly influence pricing, as luxury segments tolerate higher prices than budget ones. Finally, the product life cycle dictates price changes; for instance, prices often drop during the decline phase to clear remaining stock.
What earns the marks
- Define and distinguish between different pricing strategies such as skimming, penetration, and cost-plus pricing.
- Explain how technological advancements, such as price comparison websites and dynamic pricing algorithms, influence a business's pricing decisions.
- Analyse how the level of competition in a market affects the choice between competitive pricing and price skimming.
- Evaluate how a product's phase in the product life cycle necessitates a change in pricing strategy.
Common mistakes and how to put them right
Confusing price skimming with penetration pricing.
Put it right: Skimming starts high and lowers over time, whereas penetration starts low to build market share.
Assuming cost-plus pricing guarantees a profit.
Put it right by noting that if the price is set too high, the product may not sell, leading to overall losses.
Ignoring the target market segment when discussing price.
Put it right: Link the chosen pricing strategy to the income and preferences of the specific market segment.
Exam tips
- When asked to recommend a pricing strategy, always justify your choice using the specific context of the business and its target market segment.
- Link pricing strategies to the product life cycle, such as using promotional pricing during the introduction phase to encourage customer trial.
- Consider how technology allows businesses to adjust prices instantly based on demand, which can be used as an evaluation point for pricing flexibility.
Try the lesson
The start of the Price: Price ● pricing strategies ● influences on pricing strategies: technology, competition, market segments, product life cycle. lesson, made from checked teaching notes for this specification point.
Have a go first
Which pricing strategy involves setting a very low initial price to quickly gain market share for a new product?
Listen
Pricing strategies determine how much a business charges. Common strategies include price skimming (high initial price for novel products), penetration pricing (low initial price to gain market share), cost-plus, competitive, and promotional pricing. Businesses must adapt pricing based on key influences. Technology enables dynamic pricing and easy price comparison, forcing firms to stay competitive. The level of competition dictates whether a business is a price maker or taker. Market segments strongly influence pricing, as luxury segments tolerate higher prices than budget ones. Finally, the product life cycle dictates price changes; for instance, prices often drop during the decline phase to clear remaining stock. A strong answer earns marks for these points. Define and distinguish between different pricing strategies such as skimming, penetration, and cost-plus pricing. Explain how technological advancements, such as price comparison websites and dynamic pricing algorithms, influence a business's pricing decisions. Analyse how the level of competition in a market affects the choice between competitive pricing and price skimming. Evaluate how a product's phase in the product life cycle necessitates a change in pricing strategy. A common slip: Assuming cost-plus pricing guarantees a profit. Instead, noting that if the price is set too high, the product may not sell, leading to overall losses. Exam tip: When asked to recommend a pricing strategy, always justify your choice using the specific context of the business and its target market segment.
See it
Label the diagram
Some boxes have lost their names. Pick the right name for each number.
1Box 1
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3Box 3
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