Marketing - 3.3.2 (Price)

Question 1

6 methods of pricing

Answer 1

• Cost plus pricing
• Competitive pricing
• Penetration pricing
• Price skimming
• Promotional pricing
• Loss leader pricing

Question 2

Cost plus pricing, define, pros and cons

Answer 2

Cost plus pricing: fixed amount added to the cost

Advantages:
Easy to calculate/adjust

Disadvantages:
Competitors price can be cheaper - lowering sales

Question 3

Competitive pricing, define, pros and cons

Answer 3

Competitive pricing: price set just below/similarly to competitors

Advantages:
High sales

Disadvantages:
Could have low profit
Need to research - time consuming

Question 4

Penetration pricing, define, pros and cons

Answer 4

Penetration pricing: Setting a low price for a new product

Advantages:
High sales

Disadvantages:
Low profit

Question 5

Price skimming, define, pros and cons

Answer 5

Price skimming: high price for new product

Advantages:
Can get high profit
Improves image and status

Disadvantages:
Low sales

Question 6

Promotional pricing, define, pros and cons

Answer 6

Promotional pricing: put product on offer (very low price) for a period of time

Advantages:
Helps clear stock
Increases demand
Promotes the business

Disadvantages:
Low revenue/profit

Question 7

Loss leader pricing, define, pros and cons

Answer 7

Loss leader pricing: price set below cost so people will buy other products as well

Advantages:
High sales
Clears stock

Disadvantages:
Risky