Company that wants to enter a market where there are already competitors selling similar products...
Initially set a pricr for its product lower than its competitotrs, to tempt customers to buy their product rather than the competitors.
Once the product becomes popular with customers, its price is raised to be in line with the competitors prices.
Company that wants to eliminate competition...
Prices are lowered to force competitors prices down. Weaker competition will be unable to survive and may be forced to leave the market.
Prices then return to their original or higher level. This strategy can only be used by larger companies who can afford to make losses until the competition has been eliminated.
Prices are reduced for a short period of time.
This strategy is used by a company that wants to inject new life into a product or reduce stock levels quickly.
High prices are set for a product or service and this high price is maintained to create an exclusive image for the product.
Retailers often advertise a limited range of products at low, unprofitable prices in order to get customers. Once the customer is in the store - they will often buyother normally priced products and so the store will still make a profit from the customers total purchases.
Some firms in the same market charge similar prices for products to avoid a price war.
Some petrol companies do this.
Instead of competing on price, firms use non-pricing factors such as advertising, promotions, packaging etc.
Some companies charge different prices for the same product according to the time of day, year, or amount of usage.
This happens when a company launches a new product at a high price. The high inital price allows a company to make a large initial profit and recoup some of the research and design costs before competitors enter the market.
As competition increases, the price will gradually fall.
(new home entertainment...)