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 lo 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 physiological 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 to 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 products is in e.g decline will make them reduce the price
how does the costs and the need to make 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 be price competitive, easier to compare prices online
- offering fee returns and delivery
- comparison sites are also used
