ZIMSEC O Level Business Studies Notes: Marketing: Customer oriented pricing

  • This is pricing based on the demand for the product and customer’s perceptions of the product’s value
  • Various techniques are used
  • Perceived value pricing-is where the price is chosen to position the product in the market
  • A price is chosen which is consistent with the image of the product
  • This price is chosen specifically in consideration with other elements of the marketing mix
  • It is used in markets where demand is known to be inelastic

Price discrimination

  • This is when different prices are charged for products that are identical in every respect
  • First the market is segmented and then different prices are levied
  • For example a beauty products company can geographically segment the market and charge higher prices in up market areas
  • The business has to guard against seepage where lower priced products seep into the higher priced areas thus negating the benefits of price discrimination
  • Differential pricing-is when slightly different products in terms of branding,size, packaging or other attributes but of a similar nature are sold at different prices to different segments at different prices for example the iPhone S and the iPhone S Plus
  • A price differentiation will charge a high price in areas/to segments where the demand is inelastic
  • Another example is of urban commuter omnibuses that charge different fares to different surbubs despite the distance being essentially the same

Skim pricing

  • Also known as price skimming or market skimming pricing
  • Is a form of pioneer pricing where a new high end or very differentiated product is sold initially at a high price
  • The price is subsequently reduced at intervals to capture lower end buyers and thwart copy cats
  • The aim is to maximize profit and quickly recoup research and development costs
  • By the time the copy cats appear the firm would have at least recouped a substantial part of its costs thus allowing it to increase volumes at lower prices and enjoying economies of scale in the process
  • Skimming is more successful if the product is revolutionary and new and/or if
  • The business’s has exclusive rights to produce a product as it is protected by patents
  • There is a sufficient number of buyers willing to pay the high price

Penetration pricing

  • A strategy adopted for quickly achieving a high volume of sales and deep market penetration of a new product
  • It involves charging a very low price, sometimes even below the cost of production, in a bid to gain market share and a foothold in the market
  • Under this approach, a product is widely promoted and its introductory price is kept comparatively low
  • The assumption is that the demand for the product is elastic and the low price will increase demand
  • It will also work better if the market is so large that the current losses will be covered by profit from future sales
  • Another big assumption is that competitors will not reduce their prices to match the business’s prices

To access more topics go to the O Level Business Notes

- See latest Zimbabwe grocery prices -


We publish the latest grocery prices from Zimbabwean supermarkets. We also deliver groceries online

Quick NetOne, Telecel, Africom, And Econet Airtime Recharge

If anything goes wrong, click here to enter your query.