Definitions - Pricing Strategies

Question 1

Price?

Answer 1

The component of the marketing mix that determines the amount of money that is paid for a good or service

Question 2

Price leader or price maker?

Answer 2

A business that has the power to influence market price for a product due to a significant market share and or price inelastic demand

Question 3

Price taker?

Answer 3

A business which sets it price in at the market price due to low market share or price elastic demand

Question 4

Pricing strategies?

Answer 4

Long term pricing plans to achieve business objectives

Question 5

Price discrimination?

Answer 5

Charging different groups of customers different prices for the same good or serviced where the difference in price does not reflect the different in cost of provision

Question 6

Price skimming?

Answer 6

A pricing strategy that involves entering the market with a high price that early adopters will pay in order to recoup high development costs

Question 7

Penetration pricing?

Answer 7

A pricing strategy that involves entering the market with a low price to gain a foothold or market share in an established and competitive market

Question 8

Predatory or destroyer pricing?

Answer 8

Pricing below cost with the aim of putting rivals out of business and then raising prices one there is less competition in the market. This is illegal under competition law but often hard to prove

Question 9

Pricing tactics?

Answer 9

Manipulating price in order to achieve short term objectives

Question 10

Loss leaders?

Answer 10

A pricing tactic that involves selling products at/below cost to attract customers to the business in the hope that they will buy other full price products whilst on the same visit

Question 11

Psychological Pricing?

Answer 11

A pricing tactic designed to entice customers to buy products by making them think a product is cheaper than it actually is - £9.99 instead of £10

Question 12

Price elasticity of demand?

Answer 12

% change in quantity demand / % change in price

The responsiveness of quantity demanded of a product to a change in its price

Question 13

Price inelastic demand?

Answer 13

PED between 0 and 1

Quantity demanded is not very responsive to a change in price. A change in price leads to a relatively smaller change in quantity demand

Question 14

Price elastic demand?

Answer 14

PED of more than 1

Quantity demanded is very responsive to a change in the prices. A change in price leads to a relatively larger change in quantity demand