Marketing

Question 1

what is penetration pricing?

Answer 1

setting low price to enter industry

Question 2

advantages of penetration pricing

Answer 2

• allow business to enter market/introduce new product to existing market
• price advantage over its competitors

Question 3

what is loss leader pricing?

Answer 3

pricing a product below its cost of production to attract customer to aslo purchase other items (with higher profit margin) at the same time.

example: printer murah tapi ink mahal

however, the business usually imposes a maximum limit on how many units of the loss leader per visit. this is due to to preserve its finance

Question 4

advantages of loss leader pricing

Answer 4

• attract customers due to low price
• high sales revenue
• to clear out stock
• penetrate a market
• brand switching as low price attract customers away from tival brands

Question 5

disadvantages of loss leader pricing

Answer 5

• customers expectations for the business to continue offering loss leader product
• business loss (no guarantee customers buy products with high margin
• must have enough inventory of the loss leader product
• anti-competitive and deemed to be unethical

Question 6

what is predatory pricing?

Answer 6

charging low price, sometimes even below the cost, so as to damage the sales of rivals

risky strategy bcs many gov impose anti-competitive laws

predatory pricing can lead to price war. the consequence is the business will collapse. bcs companies will have prolong bad financial position to win the war and eventually go bankcrupt

however, this is good for customers

also, small firms will leave the industry as there is mounting pressure to reduce cost

Question 7

advantages of predatory pricing

Answer 7

• become the barrier to others to enter the market
• inflict losses on its rivals
• tempt customers to buy more of the products

Question 8

disadvantages of predatory pricing

Answer 8

• anti-competitive, illegal in many countries and violate competition laws
• customers doubt the quality
• lead to price war
• nit a sustainbale pricing strategy as firms cant afford to keep reducing prices

Question 9

what is premium pricing?

Answer 9

high price as it associates with image, reputation

type:
ostentatious consumption= customers buy them to feel good about themselves (rolex, Lv)

conspicuous consumption= customers buy for the purpose of upholding the social status (Bently, Rolls Royce)

Question 10

advantages of premium pricing

Answer 10

• exclusive and high-quality product
• high profit margin (to invest more in RnD, customer service)
  establish a sens of luxury associated with their brand
  signal of quality and reliability

Question 11

dis

disadvantages of premium pricing

Answer 11

• limit potential number of customers
• high costs involved in producing the product leading to lower profit margin
• create higher customer expectations, if fail to meet will dissatisfy them
• can make a brand vulnerable to recessions (fall in demand, sales revenue, profits etc.)

Question 12

what is cost-plus pricing?

Answer 12

a.k.a mark-up pricing
adds a profit margin to the costs of the production

mark-up is usually expressed as a percentage, such as 50% above the cost per unit

example: we want to mark-up 50% of our product, the product cost per unit is RM 10, so 10x1.5= RM 15