Chapter 37: Price (Version) Flashcards
Pricing
An element in the marketing mix; setting the right price is crucial to avoid losing customers.
Pricing Strategy
A set of plans designed to meet a specific marketing aim when setting prices.
Cost-plus Pricing
A method where a business adds a mark-up to the total costs to calculate the selling price.
Penetration Pricing
Setting a low price to start with in order to get established in the market; price may be raised once established
Competition-based Pricing
Setting prices based on competitors’ prices to avoid price wars.
Price Leadership
When the market leader sets the price and other firms follow.
Predatory Pricing
Temporarily lowering prices to drive competitors out of the market.
Price Skimming
Charging a high price initially to maximize revenue before competitors enter, and lowering it later.
Early Adopters
Consumers who are keen to buy new products as soon as they are launched
Promotional Pricing
Lowering prices temporarily to attract customers, renew interest in product or clear stock.
Discounts and Sales
Short-term price reductions, often seasonal, to increase sales.
Psychological Pricing
Setting prices slightly below a round figure to make them appear cheaper.
Loss Leaders
Selling products below cost to attract customers into a store, hoping they buy other items.
Main pricing strategies
Cost plus, Penetration, Competition, Skimming, Promotional
Patents
Legal documents giving a person or company the right to make or sell a new invention, product, or method of doing something & stating that no other person or company is allowed to do this
Formula for cost-plus pricing
Cost + Markup (%) = Final Price
Importance of pricing
It is essential to get the pricing right or people will go elsewhere to buy the goods & services
Factors that affect price
Marketing mix, Objectives, Taxes, Costs, Consumers’ perceptions, Competition
Why might cost-plus pricing be used?
To cover costs & ensure a certain profit is made
Why might price skimming be used?
To make high profit and cover research & development costs
Why might penetration pricing be used?
To enter new markets
What is dynamic pricing?
Charging different prices to customers for the same product/service depending on time or level of demand
Why might promotional pricing be used?
To increase sales & clear stock
Why might competitive pricing be used?
To maintain market share & increase sales
Why might psychological pricing be used?
To affect consumers’ perceptions of products
