Market Mix - Price Flashcards
1
Q
what factors affect price?
A
- How much a customer is willing to pay (found through market research)
- The quality of the product/image (higher quality = higher price)
- The cost of producing the product – profit only happens when costs are covered.
- Competitors prices
- The stage of the product life cycle
- Target market
- External factors (PESTEC)
- Government restrictions ( e.g. minimum alcohol pricing laws)
2
Q
what are the pricing strategies?
A
- cost - plus
- competitive
- skimming
- penetration
- price discrimination
- destroyer
- promotional pricing
- premium pricing
- loss leaders
- low price
- psychological pricing
3
Q
what is cost - plus pricing strategy?
A
A percentage of the cost is added to give a profit
4
Q
what is competitive pricing strategy?
A
- Price of product is set similar to competitors
- Where there are few large companies
- Long-term strategy
- Avoids price war.
5
Q
what is skimming pricing strategy?
A
- The price is set high to begin with and lowers over time.
- short-term strategy
- lack of competition allows maximum prices to be charged
6
Q
what is penetration pricing strategy?
A
- Prices set low to begin with and increases over time
- used in a highly competitive market
- short-term strategy
- encourages customers to try new products
7
Q
what is price discrimination pricing strategy?
A
- Some businesses will charge different prices for a product at different times of the day or year, depending on the level demand.
- Short-term strategy
8
Q
what is destroyer pricing strategy?
A
- The price is deliberately set extremely low for a period of time to force competition.
- This is actually illegal.
- Short-term strategy
9
Q
what is promotional pricing pricing strategy?
A
- Used when organisations are trying to boost sales. Prices will be lowered for a short space of time to catch customers attention.
- Short- term strategy
10
Q
what is premium pricing pricing strategy?
A
The price is permanently set higher than that of the competition – due to its premium image.
- long term strategy
11
Q
what is loss leaders pricing strategy?
A
- is when a business puts the price so ow that it makes a loss. This is to entice customers into the store or to purchase more expensive add ons in the future.
- Short-term strategy.
12
Q
what is low price pricing strategy?
A
- The price is permanently set lower than that of competitors
- this attracts customers looking for value for money – less interested in the image/quality.
- Long-term strategy.
13
Q
what is psychological pricing pricing strategy?
A
- Organisations set the price at 99p or £99.99 to psychologically influence customers looking for value for money.
- Also fits in when ‘filtering’ searches based on price.
- Short term strategy.
