1.3 Business key terms (part 2)

Question 1

competitive pricing

Answer 1

setting the price of a product based on what the competitor is charging

Question 2

cost plus pricing

Answer 2

adding a percentage (the mark-up) to the costs of producing the a product to get the price

Question 3

mark-up

Answer 3

the percentage added to the unit cost that makes a profit for a business when setting the price

Question 4

penetration pricing

Answer 4

setting a low price when launching a new product in order to get established in a market, then increasing it eventually to maximise profits

Question 5

predatory pricing

Answer 5

intentionally setting a low price in order to force rivals out of business or to create barriers of entry

Question 6

pricing strategy

Answer 6

the pricing policies or methods used by a business when deciding what to charge for its products

Question 7

product life cycle

Answer 7

the different stages in the life of a product and the sales that can be expected at each stage:

1) development
2) introduction
3) growth
4) maturity
5) decline

Question 8

psychological pricing

Answer 8

setting the price slightly below a round figure to convince consumers that they are paying a lot less - without having to significantly reduce prices

Question 9

skimming or creaming

Answer 9

setting a high price initially and then lowering it later

e.g. iPhones

Question 10

unit costs

Answer 10

the same as average costs (total costs/output)

Question 11

agent or broker

Answer 11

an intermediary that brings together buyers and sellers (middleman)

Question 12

breaking bulk

Answer 12

dividing a large quantity of goods received from a supplier before selling them on in smaller quantities to consumers via retail stores

Question 13

direct selling

Answer 13

producers selling their products directly to consumers

Question 14

distribution

Answer 14

the delivery of goods from the producer to the consumers

Question 15

distribution channel

Answer 15

the route taken by a product from the producer to the customer

Question 16

E-commerce

Answer 16

the use of electronic systems to sell goods and services

Question 17

intermediaries

Answer 17

links between the producer and the consumer

Question 18

retail

Answer 18

a business that buys goods from manufacturers and wholesalers, and sells them in smaller quantities to consumers

Question 19

wholesaler

Answer 19

a business that buys goods from manufacturers and sells them in smaller quantities to retailers

Question 20

manufacturer

Answer 20

an individual or company that assemble and produce goods