3.3 - Pricing Strategies Flashcards
How do the other P’s in the marketing mix affect pricing decisions?
The price of a product is influenced by its design, promotion, and distribution, ensuring it aligns with the overall strategy and target market expectations.
What is price sensitivity, and how does it vary among consumers?
Price sensitivity refers to how responsive customers are to price changes. Affluent consumers are less price-sensitive compared to those with lower income.
How does price elasticity of demand affect pricing decisions?
Products with elastic demand require careful pricing as small changes can significantly impact demand, while inelastic products allow for less sensitivity to price adjustments.
How does the product life cycle stage influence pricing?
Prices may be higher during the introduction and growth stages but are often reduced during the decline stage to boost sales.
What is price skimming?
Price skimming involves setting a high price for a new, innovative product to capitalize on early adopters and scarcity value, then lowering the price as competition increases.
What is penetration pricing?
Penetration pricing involves launching a product at a low price to attract customers and gain market share, often effective in price-sensitive markets.
What is cost-plus pricing?
Cost-plus pricing involves adding a percentage markup to the unit cost of a product to ensure a profit.
What is predatory pricing, and is it legal?
Predatory pricing is deliberately setting low prices to drive competitors out of the market, which is illegal in the EU and US.
What is competitive pricing?
Competitive pricing involves setting prices equal to or lower than competitors, often used by supermarkets and department stores.
What is psychological pricing?
Psychological pricing is based on customer perceptions, such as using higher prices to signal higher quality.
How has the rise of online retailers affected pricing strategies?
Online retailers need to be price-competitive due to ease of price comparisons, often compensating with free delivery or returns to add value.
Why are price comparison sites significant?
They save customers time and effort by allowing easy price comparisons, pushing retailers to maintain competitive prices and monitor competitors’ pricing closely.
