1.3.3 Pricing Strategies (3/4)

Question 1

Factors that determine the most appropriate pricing strategies (6)

PPASSC

Answer 1

1) Product Differentiation and USP

2) Price elasticity of demand

3) Amount of competition

4) Strength of brand

5) Stage in product life cycle

6) Costs + needs to make a profit

Question 2

How does product differentiation + USP impact pricing strategies?

Why can they charge higher prices

Answer 2

Businesses can charge higher prices if it has a USP or a product that is different from rivals.

because customers are willing to pay more for that difference

Question 3

How does price elasticity of demand impact pricing

Answer 3

if product is price elastic businesses may not be able to increase prices because demand will decrease significantly

if product is price inelastic businesses may be able to increase price because demand will be relatively the same

Question 4

How does amount of competition impact pricing

Answer 4

little competition means you can charge higher prices as as you dominate the market

Question 5

How does strength of brand impact pricing

Answer 5

Businesses with strong brands can generally charge a higher price than those with weaker brands

Question 6

How does the stage in product life cycle impact pricing

Answer 6

As a product passes through different stages of the product life cycle a business may adjust their prices

e.g Businesses may use penetration pricing and then increase prices as the product becomes more established

Question 7

How does costs + needs to make a profit impact pricing

Answer 7

Price must cover costs of production and should also a generate profit

could explain why some businesses use cost plus pricing