1.3.3 Pricing Flashcards
what is cost-plus pricing?
price is set by applying a percentage margin based on the unit costs of production or supply
How do you calculate the mark up on unit cost?
price= unit cost + ( unit cost divided by 100 then x by mark-up)
what is predatory pricing?
where a company, set price at an extremely low level, in order to drive competitors out of the market.
what is competitive pricing?
company sets its price based on prices set by its competitors in the market.
what is psychological pricing?
influence consumer perception through the use of specific price point that appeals to their emotions
what is price skimming?
- for new and innovative products
- high prices when first reach the market
- high price boosts products image
- prices are then dropped considerably after being on the market for a year or so
eg. technology
what is penetration pricing?
- launching product at a low price in order to attract customers
- difficult to raise the price without losing customers
How does USP’s affect pricing decisions?
- higher price because it is highly differentiated.
How does level of competition affect pricing decisions?
*If the price is set above competitor products without being differentiated no one will buy it
How does strength of brand affect pricing decisions?
*due the the positive reputation of the brand, customers will be willing to pay higher prices
How does stage in the product life cycle affect pricing decisions?
*depending in what stage of the life cycle the product is in. eg. decline will reduce the price.
How does the costs and the need to make a profit affect pricing?
*price needs to be set to cover the cost of making the product in order to gain a profit
How can changes in social trends affect pricing strategies?
*online retailers used more
*need to me price competitive, easier to compare prices online
*offering free returns and delivery
*comparison sites are also used
