13. Marketing mix: price Flashcards
Define Cost plus pricing
The cost of manufacturing the product + profit mark up
Define competitive pricing
Product priced just below competitors prices to capture more of the market
Define penetration pricing
Product priced just below competitors prices to enter new market
Define price skimming
Price is set high for a new product
Define promotional pricing
Product is sold at a low price only for a short period of time
Define price elasticity
Amount of responsiveness of a demand to a change of price
How do you calculate cost plus pricing
(Total cost/output) * %markup
Justify cost plus pricing
The business may have a few number of competitors so a fixed profit can be earned for each product
Justify Competitive pricing
Consumers and unlikely to buy your product unless they think your product is better sold
Justify Penetration pricing
Likely to achieve high market share quickly
Justify Skimming pricing
Earns a high profit per unit and helps to cover development costs
Justify Promotional pricing
It reduces inventory holding costs
When is promotional pricing used
When you want to sell unwanted inventories
