Cost-plus pricing (or mark-up pricing)

Adds a profit margin to the costs of production, thereby ensuring that each unit sold contributes towards the profits of the firm.

Loss leader pricing

Pricing a product below its cost of production so as to attract customers to also buy other items (with a higher profit margin).

Mark-up (or the profit margin)

The difference between the price and the cost per unit.

Penetration pricing

Setting a low price in order to enter an industry, which allows the firm to compete against existing firms and to gain market share.

Predatory pricing

A strategy that involves charging a low price, sometimes even below the cost, so as to damage the sales of rivals.

Price

The value of a good or service that is paid by the customer.

Price discrimination

Involves a business charging different prices to different market segments for basically the same good or service, e.g. adult and child fares at the cinema, theme park or concert.

Price leadership

A strategy of following the price set by the dominant firm in the industry (the firm with the largest market share).

Psychological pricing

Uses numbers and decimals in such a way to make the price seem (artificially or psychologically) lower, e.g. $9.95 instead of $10.

Skimming

The pricing strategy that sets a high price during the introductory (launch) of a new and original product, with gradual price reductions as rival products enter the market.