4.5.2|Price

Question 1

mark up

Answer 1

advantages:
simple to uderstand

disadvantages:

Question 2

Penetration pricing

Answer 2

setting low price in order to enter an industry

advantgaes:
allow firm to enter existing market

disadvantages:
not suitable long term

Question 3

Loss leader pricing

Answer 3

pricing a product below its cost of production

advantages:
attract customer
to clear out older stock

disadvatanges:
customers expect firm to continue offer

Question 4

Predatory pricing

Answer 4

to damage the sales of rivals

advantages:
tempt customers to buy more

disadvantages:
illegal in many countries
customers might doubt the quality of the product

Question 5

Premium pricing

Answer 5

high price for its product because of the associated image etc.

example: airplane (economy vs business class)

ostentatious consumption: the purchase of expensive products which make customers feel good about themselves (Dior perfume)

Conspicious consumption: spending for the purpose of upholding the social status (Bentley)

advantages:
higher profit margin

disadvantages:
higher customer expectation
limit the potential number of customers