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Chapter 13 Marketing mix: price Flashcards

1
Q

What are the 5 types of pricing strats

A 
Competitive
Penetration
Promotional
Price skimming
Cost plus pricing
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2
Q

What is competitive pricing

A

When the price is set in line or just bellow that of its competitors’ prices

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3
Q

Adv of competitive pricing

A

Helps avoiding competition
Helps differtiate products
Avoids price competition

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4
Q

Disadv of competitive pricing

A

If the cost of production of one company is higher than the other, then competitively pricing a product could lead to less profit/not enough.

Hard to show the quality of the product

Detailed market research is required for competitive pricing - extra cost

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5
Q

What is penetration pricing

A

When the price is set lower than competitors’ prices in order to enter a new market/launch a new product in an existing one.

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6
Q

What is the short time frame where penetrative pricing is used when a new product enters a market

A

interruption phase.

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7
Q

Adv of penetration pricing

A

Helps ensure the product enters the market

Helps gain market share initially

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8
Q

Disadv of penetration pricing

A

Profit per unit would be low initially

Can’t use penetrative pricing for a branded product

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9
Q

What is price skimming

A

is where a high price is set for a new product on the market.

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10
Q

Which kind of products is price skimming used for

A

New, innovative, unique products

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11
Q

Adv of price skimming

A

Helps establish the product as a high quality product

High R&D Costs could be covered because of the high profits.

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12
Q

Disadv of price skimming

A

High price could discourage potential custoemrs fro buying it

Could encourage competitors to enter the market and set a lower price

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13
Q

What is promotional pricing

A

is when a product is sold at a very low price for a short period of time.

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14
Q

Why would businesses use promotional pricing

A

Clear unwanted inventory

Extend product life cycle of the product

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15
Q

In which phase of the product life cycle is promotional pricing used generally

A

Saturation or decline stage

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16
Q

Adv of promotional pricing

A

Renew interest in the product

Clear unwanted inventory - generate at least some revenue with the unwanted inventory.

17
Q

Disadv of promotional pricing

A

Less revenue and profit
Could lead to fierce price competition - which would eventually lead to it being unprofitable for the company to sell the product

18
Q

What is cost plus pricing

A

is the cost of manufacturing the product plus a profit mark-up.

19
Q

What is a mark up profit

A

The profit the company wants per unit sold

20
Q

Formula for cost of production per unit

A

total cost/output

aka average cost or unit cost

21
Q

Adv of cost plus pricing

A

Each unit earns profit
Diff mark ups for diff markets
Easy to calculate - dont have to do much market research n allat

22
Q

Disadv of cost plus pricing

A

Could loose sales if the price is more expensive than competitors
Total profit will only be made if sufficient units are sold
No incentive for businesses to reduce costs
Increase in costs would be passed to customers

23
Q

What is dynamic pricing

A

Prices that change according to demand

24
Q

Which pricing strat for a new product ENTERING that is not unique

A

penetrative

25
Q

Which pricing strat for an existing product

A

Competitive

Promotional

26
Q

Which pricing strat for a new and unique product

A

price skimming

27
Q

Which pricing strat for a company with a good brand image which releases a new product

A

price skimming

28
Q

Which pricing strat for a high cost product

A

cost-plus pricing

29
Q

If the business wants to gain market share it should use which strat (new product)

A

Penetrative

30
Q

If the business wants to maintain sales it should use which strat

A

Competitive pricing

31
Q

What is the price elasticity of demand

A

Responsiveness of consumer demand to a change in price.

32
Q

What is PRICE ELASTIC DEMAND

A

Consumers are very sensitive to changes in price

33
Q

What is price inelastic demand

A

Consumers are not sensitive to changes in price

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