1.3.3 pricing strategies

Question 1

definition of price penetration

Answer 1

launch products at a low price and over the course of the product life cycle, gradually increase the price

Question 2

advantages of price penetration

Answer 2

good way to gain market share

hook customers who are already loyal to the brand to other products = more sales = more market share = increase prices

Question 3

definition of price skimming

Answer 3

when a product has hype around it, consumers are prepared to pay a premium, then when the hype starts to die down over-time, you start to gradually lower the prices e.g. apple products

good to maximise sales revenue

Question 4

definition of competitive pricing

Answer 4

pitch price at a similar level to other products on the market (competitors), therefore consumers will base their decisions on other aspects such as quality, promotions but not price

Question 5

definition of predatory pricing

Answer 5

pricing products at a very low level - a level that rivals may be able to match in the short-term but will not be able to sustain selling at a low price over the long-term

used by firms who are confident they can drive other firms out of the market, allows them to gain more market share by eliminating competition

Question 6

definition of loss leadership pricing

Answer 6

choosing to offer a lower price on a key product (to the point at which the firm is making a loss) to capture attention of consumers in a market e.g. tesco meal deal

Question 7

definition of psychological pricing

Answer 7

make it seem as though the products are more of a bargain than they actually are e.g. pricing something at $1.99 instead of $2

Question 8

definition of discrimination pricing

Answer 8

charging different market segments, different amounts for the same product/service they experience e.g. cinemas charge less for a child’s ticket than an adult’s