1.3.3- Pricing Strategies

Question 1

Cost plus pricing

Answer 1

-the cost to produce the product + a profit margin in £/ a % markup on top

Question 2

Competitive Pricing

Answer 2

• products/ services in line with competitors

- means a consumer will have to judge a product on non price factors such as quality

Question 3

Skimming or Creaming price

Answer 3

• product is priced highly to start with to take advantage of the desirability factor when new
• usually applied to products with a short product life cycle

Question 4

Penetration pricing

Answer 4

• setting the price low to encourage sales
• this incudes repeat purchasing, then the business will put the price up
• e.g. tea bags, biscuits

Question 5

Predatory pricing

Answer 5

• monopolies may reduce prices so much so though competitors cannot make a profit
• increases barriers to entry of the market and will also push competition out of the market

Question 6

Psychological Pricing

Answer 6

pricing a product at £1.99 rather than £2

Question 7

Factors that determine the most appropriate pricing strategy

Answer 7

• USP
• PED
• level of competition in the business
• strength of brand
• stage in the product life cycle