Pricing strategies and tactics

Pricing strategies:are used to reach market objectives
1.price skimming:is a strategy in which a high price is set to yield a high profit margin
2.penetration pricing:low prices are set to break into the market or to achieve sudden benefit in market share
3.price leadership:involves the large companies set a market price that all small firms should follow
4.price taking:involved small firms follow the price which set by a price leader.
5.loss leadership:set a very low price in order to encourage consumers to buy other products
6.psychological pricing:to give a impression of value
7.cost-plus pricing:price set is the average costs of a product plus a sum to ensure a profit

Formula revision in UNIT 2

Measuring profitability:
Two ways to measure profitability are the net profit margin and return on capital
1.net profit margin:
net profit before tax/sales

2.return on capital (invested):
net profit before tax/capital invested

Labour turnover: is the proportion of the employees leaving a business over a period of time
number leaving a business over a given period of time/average number employed over a period of time

Absenteeism:the rate of absenteeism is the proportion of employees not at work on a given day
number of staff absent on 1 day/total number of staff

Absenteeism rate for a year:
total number of days lost/total number of days that could be worked *number of staff

Unit costs:
total costs/units of output

Punctuality:
deliveries on time/total deliveries

Capacity utilisation:
actual output per annum/maximum possible output per annum