1.3.3 Pricing Strategies Flashcards
Definition of Cost Plus
When a business calculates the cost of production then adds a markup to get selling price
Definition of Price Skimming
When a business sets a price high at first but can gradually lower
Definition of Penetration
When a business sets a low price at first but can gradually increase
Definition of Predatory
When a business sets prices so low it drives out competitors (illegal)
Definition of Competitive
When a business sets prices based on its competitors prices
Definition of Psychological
When a business takes into account customers attitudes so they perceive the price as better
How does USP/Differentiation affect Pricing
Products with more USP’s can demand higher prices
How does PED affect Pricing
Businesses will need to consider substitutes and competitors prices
How does Competition affect Pricing
In highly competitive markets, businesses will need to set prices lower
How does Brand Strength affect Pricing
A string brand can command higher prices because of loyalty
How does Costs affect Pricing
Prices will need to cover cost of production to provide sustainable profit margin
How does Product Life Cycle affect Pricing
Intro - Prices lower
Growth - Prices Increase
Maturity - Prices can lower
Decline - Prices discounted
How has Pricing changed to Online Sales
-Dynamic pricing has been used
-Prices can be higher when supplies low
-Prices online compared to physical store can be different depending on what the business wants to pursue
How has Pricing changed to Price Comparison Sites
-Businesses need to stay competitive as consumers can easily compare prices
-Price matching polices can be introduced
-Businesses can also compare their prices and adjust to competitors
