1.3.3 Pricing strategies

Question 1

What is penetration pricing

Answer 1

Penetration pricing is setting a low initial price in order to gain market share, and then gradually increase price over time.

Question 2

Why are some markets hard to penetrate

Answer 2

• Alot of consumers have strong brand loyalty. This is why p pricing is effective due to the factor of price influencing their tastes and preferences.

Question 3

What is price skimming ?

Answer 3

• This is when a good is priced at a higher initial price due to it being highly anticipated and many consumers being prepared to pay a higher premium . Eventually, once other goods have been released into markets they will skim price as people are no longer wanting to pay high prices anymore.

Question 4

What is comp pricing

Answer 4

Prices are based on the prices which are set by competitors. Either aiming to set them lower or the same.

Question 5

Who are price leaders in comp pricing

Answer 5

• Firms in the market which have leading products set the price in the market and other firms follow suit.

Question 6

Who are price takers in comp pricing

Answer 6

-Smaller firms which set their prices lower than market price.

Question 7

What is psychological pricing

Answer 7

Where firms set prices where it seems it is a greater value than it actually is. For example 9.99 rather than 10.00

Question 8

What is predatory pricing

Answer 8

-Where firms set an initial low price to force higher market share due to low price being attractive to consumers. This is a short term loss how ever this will increase market share

Question 9

What is equation of PED

Answer 9

%change in qd / %change in income