1.3.3 Pricing Strategies Flashcards
what is price?
the money charged for a product or service
what does price directly impact?
the value of sales
(only factor in marketing mix that does this)
what are some important influences on the value of sales?
(not price)
the businesses financial and marketing objectives
give some financial objectives a business may have
-maximise profit and sales revenue
-achieve target level of profits
-achieve target rate of return
-improve cash flow
give some marketing objectives a business may have
-maintain current and improve market share
-prevent competition
-increase sales
-build a brand (with customer loyalty and good reputation)
three levels of pricing
pricing methods, tactics and strategies
pricing methods
methods used to calculate the actual price set
pricing tactics
these are adopted in the short run to suit particular situations
pricing strategies
adopted over medium - long term to achieve marketing objectives
two methods of pricing for new products
price skimming or penetration
what is price skimming?
setting a high price to maximise profits and then slowly lowering it after initial sales
advantages of price skimming
-helps to achieve quick recovery of development costs
-maximises profits
disadvantages of price skimming
-may disattract people if set too high
-may lose to competitors if prices set too high
what is price penetration?
offering a product at a low introductory price, price is then increased once the target market share is reached
advantages of price penetration
-gains market share quickly
-builds customer usage and loyalty
-can be used as an extension strategy
-helps build sales of higher-priced related items
