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EdExcel GCSE Business > 2.2.2 Price > Flashcards

2.2.2 Price Flashcards

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1
Q

Importance of price in the marketing mix:

A
  • the price of a product gives customers an indication of quality
  • in competitive markets, changes in price can have a significant influence on demand
  • branded products generally have a higher price than non-branded products because they are more expensive to produce and promote
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2
Q

How does the cost of making a product impact what price a business will set for a product?

A
  • price represents the revenue the business receives from selling each unit of its product
  • If the unit cost of the product is known, setting a price that is greater than the unit cost will ensure that the product is profitable, as long as consumers are willing to pay that price
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3
Q

How does the quality of a product impact what price a business will set for a product?

A
  • Consumers expect to pay more for a high-quality product, as they understand that high-quality products usually cost more to make
  • Charging a higher price often gives the impression that a product is of a higher quality, even when it may not be
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4
Q

How does the brand image of a product impact what price a business will set for a product?

A
  • Maintaining a brand image requires a high level of marketing activity and a consistent level of quality
  • These cost money, so a branded product often has a higher price than a non-branded product
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5
Q

How does the demand and supply of a product impact what price a business will set for a product?

A
  • If there is high demand for a product, consumers are likely to be willing to pay more for it
  • Therefore, businesses can charge a higher price for popular products, unless there are other businesses supplying similar product
  • If this is the case, they will need to consider their competitors’ prices
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6
Q

What will the pricing strategy used by a. business depend on?

A
  • the nature of the product
  • the quantity of the product the business intends to sell
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7
Q

How are premium prices/pricing high a pricing strategy?

A
  • while accepting there will be alow volume of salesbut at ahigh profit margin (low volume - high margin)
  • businesses using this strategy determined by quality of product and its brand image
  • luxury brands can charge a premium price for their products - have good USP - target premium end of market
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8
Q

How is competitive pricing a pricing strategy?

A
  • many pricing decisions are based on comparing the average market price - what other businesses charge for their products and services
  • set price at what market is paying
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9
Q

How is pricing low a pricing strategy?

A
  • in order to achieve a high volume of sales but at a low profit margin (high volume - low margin strategy)
  • must be able to keep costs low and have the facilities to product and distribute large quanitites
  • low price may be used by generic/non-branded products with little or no USP to encourage product trial when a product is first launched
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10
Q

How is skimming a pricing strategy?

A

initially set a high price and lower it as the market evolves

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11
Q

How is penetration pricing a pricing strategy?

A

initially set a low price to get an increase in customers

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12
Q

How is value-based pricing a pricing strategy?

A

set price based on perceived value of product

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13
Q

How may competition influence a business’s pricing strategy?

A
  • in competitive markets, businesses often compete on price, particularly when they sell similar or identical products
  • a business has to consider its competitors and the position of its brand in the market
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14
Q

How may technology influence a business’s pricing strategy?

A

new technology can lower the. costs of production and allow a business to set more competitive pricing

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15
Q

How may market segments influence a business’s pricing strategy?

A
  • different prices may be applied to customers with different characteristics
  • when setting prices, businesses also have to take into account the kinds of consumers their products are aimed at
  • In a niche market a business will usually be able to charge a higher price while expecting a lower sales volume, as the number of competing products is likely to be small
  • In contrast, businesses selling to a mass market are likely to set prices at a lower level as they will expect a high volume of sales
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16
Q

How may product life-cycles influence a business’s pricing strategy?

A

the product’s stage in the product life-cycle will influence pricing decisions

17
Q

How may product life-cycle for a new, innovative product influence a business’s pricing strategy?

A
  • a business that introduces a new, unique product may initially choose to price the product high while accepting that there will be a low volume of sales but a high profit margin
  • This is likely to be effective while there is little competition
  • However, by the time the product has reached maturity, it is likely to be facing competition from other similar products. If this is the case, then the business may no longer be able to charge a high price for the product
  • If the business reduces the price, existing customers are likely to continue buying the product and other customers may switch from competing products
18
Q

How may product life-cycle for generic products influence a business’s pricing strategy?

A
  • for generic products, businesses often use a low starting price to encourage customers to try the product during its introduction stage
  • This means pricing a product low with the aim of selling it at a high volume but at a low profit margin
  • During the growth stage, prices may be kept low initially, but will eventually rise when the product becomes more established
  • During a product’s maturity phase, a business might choose to keep the product’s price down in order to maintain a similar level of sales to those achieved during its growth period.
  • During the decline stage of the product life cycle, businesses are more likely to use offers and switch to a high-volume, low-price strategy to try to maintain sales

EdExcel GCSE Business (38 decks)

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