1.3.3 Flashcards
Definition of price
The component within the marketing mix that defines the amount of money that is paid for a good or service by the customer.
What are pricing strategies?
The methods that an organisation will use to price a product in order to meet marketing objectives.
How many types of pricing strategies are there?
7
What is cost-plus
When a percentage mark-up is added to the cost of producing a good or service to calculate the selling price
What is price skimming?
Setting a high initial price for a new product to recoup high development costs. This can also create a must-have mentality.
What is price penetration?
Setting a low initial price for a new product to get a foothold in the market and gain market share. A suitable strategy when entering the mass market.
What is predatory pricing?
When prices are set low for a short time to force competitors out of the market. Dominant businesses usually use this as they can afford to make a loss.
What are price takers?
Smaller firms in a market who set their prices based on market price
What are price leaders?
Firms that dominate a market set the price and other firms in the market follow suit.
What is psychological pricing?
When a firm sets a price for the product to entice the customer into making a purchase by making it sound cheaper than it is.
Name 3 factors that determine a pricing strategy
Number of USPs
Price elasticity of demand
Level of competition in the business environment
Name 3 more factors that determine a pricing strategy
strength of brand
stage in the product life cycle
costs and need to make a profit
