1.3.1 Pricing Stategies 🏷 Flashcards
What are the six kinds of pricing Strategies?
Cost plus pricing - adding a mark up to unit costs
Competitor/ competitive pricing- a set a price similarly to competitors use in Competitive market
Skimming/ creaming pricing- launch product in the market with a high price for a limited time
Penetration pricing - charge low price for a limited time to get foothold of the market
Predatory /destroying pricing- aims to eliminate competitors from the market lower price until rivals leave market in period of time
Psychological pricing - slightly below the round figure- eg.  £9.99 looks like a bargain
What are the positives and negatives of costs plus pricing?
Negatives-
ignores the market conditions mark up may be too high to have a product lead to low sales
Difficult to identify all costs associated with multi product businesses
Positives - can be used to make a profit
What are the positives competitor/competitive pricing?
Positives - Gets rid of the price war and helps customers does your business in non-price ways
it’s a safer pricing strategy- makes you aware of market leader and competitors
What are the positives and negatives of skimming creaming pricing?
Positives -can meet high development costs
change in the market where customers are prepared to pay
help maximise revenue only use if demand is inelastic
attract less competitors as price is lowered by the customer groups are drawn into the market
is good for research and development higher prices elevate product image
Negatives - may not always get demand
Price too high can’t attract customers
Lose the competitors
What are the 6 factors that determine the most appropriate pricing strategy ?
- Number of USPS or amount of differentiation
- Price elasticity of demand
- Levels of competition in business environment
- Strength of brand
5.Stage in product lifecycle
- Cost of production and key need to make a profit
What pricing strategy would a product having a USP have ?
Skimming and creaming pricing
As it provides a feature customers cannot revise anywhere else
Giving competitive advantage
Charging higher price - customers view it as a higher value - easily differentiated from rival
What pricing strategies would a elastic or inelastic product have ?
Penetration pricing for elastic product as it’s elastic to demand allows them to take advantage of prices in periods
Inelastic products - skimming - can charge higher prices , demand not effected
What pricing strategies would a product facing high levels of competition take ?
Competitive pricing - allows business to be judged by non price ways like customer service of satisfaction
Avoids having higher prices than competitors
What pricing strategies would a business go for is they have a strong brand image ?
Price skimming - Already have a loyal established customer base that is willing to may money for your products/ services
What pricing strategies would a business go for due to types of production?
If you have a night cost production you have more fixed costs to pay - cost plus pricing to ensure your mark up is covert - allows you to meet profit margin
What are some changes in prices to reflect social trends ?
Online sales
Dynamic pricing - where a price made by a customer fro a product will not always be the same
Auction sites - gumtree - seller has to pay fee for the site but allows them to get the best price out of their product
- customers also get a sense of urgency and fear of losing out on a bargain - induce more sales
Personalised pricing - online user data enables business to charge different prices to different customers eg pay - can charge higher prices to customers that are able to pay more
Subscription pricing - charging customers a monthly fee for a product or service
Price comparison sites - displayed best product or service based on price for consumer
Overall customer awarenes
