2.2.2 Price

Question 1

Name The 2 Different Pricing Strategies?

Answer 1

• 1) Price Skimming.
• 2) Price Penetration.

Question 2

Write a definition of Price Skimming?

Answer 2

• Price Skimming is setting a high price for goods and services

Question 3

Give a Example of Price Skimming?

Answer 3

• Apple Launched its New Iphone 16 for £41.62 a Month or £999.

Question 4

Why Could Apple Set a High Price for Its Product?

Answer 4

• New Technology used in the phones differentiates the phone from the competitors

Question 5

Give a Benefit of Price Skimming ( 3 Marker)

Answer 5

One Benefit Of Price Skimming is That Business Have the Opportunity to Receive a High Profit (P)This Is because it can help to Pay For R&D costs (S) This Allows Business to Invest in Further product development (S)

Question 6

Give a Drawback of Price Skimming ( 3 Marker)

Answer 6

One Drawback of Price Skimming is That Sales may be Slow Because Products are expensive (P) This is Because no More Customers can Afford or are willing to pay high prices (S) This Leads to Customers looking for cheaper alternative products Reducing sales revenue (S)

Question 7

Write a Definition of Price Penetration?

Answer 7

Price Penetration is When a Business Sets a Low Price for its goods or services Through Special Offers.

Question 8

Give a Example of Price Penetration?

Answer 8

• Netflix Uses Low Price Points to Attract Customers.

Question 9

Name 2 Ways Netflix Sets a Low Price for Its Streaming Service?

Answer 9

• 1) Often used by New Business to Support a New Product launch to Draw consumers Away from the Competitions.
• 2) This May Result in initial loss of profit for a business.

Question 10

Give a Benefit of Price Penetration (6 Marker)

Answer 10

one Benefit of Price Penetration is that it can increase a business market Share (P) This is Because the product is seen as value for money (S) This leads to long-term profitability of having higher sales (S) Therefore the business can use these high profit levels as a source of finance (S) This will enable the business to grow or remain competitive in the market (S) As a Result Driving profit levels and pleasing shareholders (S)

Question 11

Give a Drawback of Price Penetration( 6 Marker)

Answer 11

One Drawback of Price Penetration is Lower Contribution to Fixed Costs Than is Prices were Set High (P) This is because each customer is now paying less for the Product/Service (S) As a Result the break-even Point Wil be Higher (S) This put more pressure on the business to generate a profit (S) As a Result Shareholders may be unhappy with the level of dividends received (S)

Question 12

Name the 4 Things that Influence Pricing Strategies?

Answer 12

• 1) Technology
• 2) Competition
• 3) Target Market
• 4) Product Life Cycle

Question 13

Influences on Pricing Strategies on Technology (3 Marker)?

Answer 13

The big change to pricing decisions in recent years has been due to increased use of information researched on the internet (P) For example price comparison websites (S) This Leads to an increase in e-commerce (S)

Question 14

Influences on Pricing Strategies on Competition (3 Marker)?

Answer 14

If there is lots of competition in the market customers have more choice (P) This is because When competition is high businesses Have to set Lower Prices in order to compete (S) Unless their products has a Usp/ Strong Brand (S) This leads to Competition Falling in the market and customers have less choice and are forced to pay a high Price (S)

Question 15

Influences on Pricing Strategies on Target Market (2 Marker)?

Answer 15

If the business targets the mass market this will lead to the business setting low prices (P) Which leads to low margin selling high volume of goods (S)

Question 16

Write a Definition of a Niche Market?

Answer 16

• Niche Market is a Business That Only Targets Certain People.

Question 17

Give a Example of A Niche Market?

Answer 17

• American Golf

Question 18

What Type of Strategy Does Niche Market Business Use and What Does this Mean for Them?

Answer 18

• Niche Market Businesses Use Price Skimming for Setting high Prices for Specific Products.
• This Means they have a high revenue per customers but usually sell a lower volume of goods.

Question 19

Influences on Pricing Strategies on Niche Market (2 Marker)?

Answer 19

If the Business Targets a Niche Market this will lead to setting high prices (P) Which Leads to high margin selling low volume of goods (S)

Question 20

What Type of Pricing Strategies Should a Business Use in the Introduction Stage in the Product life cycle?

Answer 20

• Companies Like Apple use price skimming due to a string brand.
• Companies like Netflix Use price penetration to set a low price to attract customers.

Question 21

What Type of Pricing Strategies Should a Business Use in the Growth Stage in the Product life cycle?

Answer 21

For most business once growth is established Prices rises and Business can then use this price to grow finance without any external sources of finance.

Question 22

What Type of Pricing Strategies Should a Business Use in the Maturity Stage in the Product life cycle?

Answer 22

If Mangers Thinks That growth is over they may want to squeeze price up.

Question 23

What Type of Pricing Strategies Should a Business Use in the Introductions Stage in the Product life cycle?

Answer 23

• If a Brand continues to have a loyal customers they are likely pushing Prices to Maintain Profit Levels.

Question 24

Influences on Pricing Strategies on Product Life Cycle ( 2 Marker)

Answer 24

Pricing Methods will change depending on the stage the product is at in its product life cycle (P) This is because the price of a product in the decaling stage of its product life cycle will need to be lower than when it was first Launched (S)

Question 25

Give a Benefit of Charging High Prices for a Unique Product ( 3 Marker)

Answer 25

Charging High Prices will allow a Business to Continue to use the finest raw materials to product Products (S) This is because each product is unique and made to meet the Requirements of of each customer By using job production (S) This Leads to higher production costs of each product being covered by the high price (S) Therefore allowing the business to remain profitable (S)

Question 26

Give a Drawback of Charging High Prices for a Unique Product ( 3 Marker)

Answer 26

It Could Reduce their competitive advantage in the Market if the Prices are too high (P) This is Because not Everyone has the income to afford the high price for the unique product (S) This could lead to losing market share (S) Therefore reducing revenues and profitably (S)