2.2.2 Price Flashcards
What are the pricing strategies a business can use?
Set a low price when a product first enters the market, encourage people, and then raise prices later
Decide on price to reflect the brand and quality of product
Consider profit margins
Higher prices for well known brands, customers attracted to the desire to be part of a premium market
Higher prices for a new product that is innovative or has special features
Price set in line with competitors so customers have to make decisions on which products to buy based on other factors
What are profit margins?
The difference between the sale price and the cost of production
What are the influences on pricing strategies?
Technology
Competition
Market Segments
Product Life Cycle
What influence does technology have?
Customers can easily compare prices on comparison websites and businesses need to ensure that their prices are in line with competitors
Businesses can make their goods quicker or provide a quicker service, which in turn saves costs and increases profit for the business.
What is Freemium?
Pricing strategy used mainly for digital products, such as software, media or gaming, that are offered for free
What influence does competition have?
Competitive environment can drive a business to reduce their pricing to remain competitive in the market.
If a business sells their product with little differentiation, they will have to keep their prices similar to competitors
What influence does market segments have?
Must consider the ability of their target customers to pay for their products
If they are price-sensitive, then demand will fall if the business charges a price that is too high.
What influence does the product life cycle have?
Introduction and growth: price helps to determine the value of the product, push sales or recover development and promotion costs
Maturity: price can be used to maintain profit margins; in a competitive market a business may set their price to be in line with competitors to maintain their market share
Decline: price helps to encourage sales when customers are not prepared to pay a high amount
