1.3.3 pricing strategies

Question 1

what are pricing strategies

Answer 1

pricing strategies are the way businesses come up with the way they price products

Question 2

what is cost plus pricing and name some benefits and limitations of it?

Answer 2

adding a percentage of how much it cost to produce the product on to create the price

• benefits: provides constant rate of return and doesn’t require a lot of research
• limitation: ignores competition pricing, ignores replacement costs

Question 3

what is price skimming and give some benefits of limitation of limitations?

Answer 3

a product is originally priced high because its desirable because its new.

• benefits: it helps to create a strong brand image
• limitations: competition can offer lower prices to compete

Question 4

what is penetration pricing and what is a benefit and a limitation

Answer 4

setting low prices on a new products to encourage sales and gradually raising prices.

• benefits : normally have a quick and high acceptance from customers
• same customers may not switch brands just cause of low prices

Question 5

what is predatory pricing and what are some benefits ad limitations of it?

Answer 5

predatory pricing is when a business lowers the price so much to the point to force out competitors

benefits: reduces competition as weaker competition as competitors won’t be able to compete
limitations: raises questions of quality of product, illegal in different countries

Question 6

what is competitive pricing and what are some benefits and limitations of it?

Answer 6

• products being in line with market averages
  benefits product likely to be judged on quality rather then price
  limitation: basing it on market can make it harder to break even

Question 7

what is psychological pricing and what are benefits and limitations?

Answer 7

pricing something at a lower price at sight but virtually the same price

benefit: easier to direct buyer attention to targeted items
limitations: it can create long term pricing explination

Question 8

what is dynamic pricing and what are some benefits and limitations of it

Answer 8

dynamic pricing varying the price for a product to reflect market conditions

benefits: can bring higher profits at time, better inventory
limitation: customer dissatification can affect with price changes can effect sales