marketing mix: price Flashcards
why do business adopt new pricing strategies
break into new market
increase market share
increase profit
make sure cost are covered and target profit is made
what is the definition of cost-plus pricing
cost of manufacturing the products plus a profit mark up
what are the 5 pricing strategies?
cost pulse, competitive, penetration, price skimming and promotional pricing
what is the benefits of cost plus pricing
method is easy to apply
diff profit mark-up could be used in different markets
each product earns profit for the business
what are the limitation of cost plus pricing?
business cld lose sales if selling price is higher than competitors’ price
a total price will only be made if sufficient units of products are sold
there is no incentive to reduce cost
what is competitive pricing
when the product is prices in line with or just below competitors’ prices to try to capture more of the market
what is the benefits of competitive pricing
sales are likely yo be high as price is realistic level and products is not under or over priced
avoids price competition, which can reduce profits for all business in the industry
use when its difficult to tell the difference between competitors products
what are the limitations of the competitive pricing
if the cost of production for a business is higher than those of competitors( if higher quality) it cld lead to losses
higher quality product might need to be sold at a price higher than competitors to show its higher quality
takes time and money to research what price competitors is doing
what is penetration pricing
when the price is set lower than competitors’ prices in order to be able to enter a new market
what are the benefits of penetration pricing
use for newly launch products to create a impact
ensure new products enters market successfully
market share built quickly
what are the limitations of penetration pricing
profit per unit may be low
customers may expect low prices and reject if increases prices
not good for branded products with a higher quality brand image
what is the meaning of price skimming
where a high price is set for a new product on the market
usually when new technology is developed
what are the benefits of price skimming
establish products to be good quality
high r&d can be done from rapid profit made
high price will leave profits before competitors launch similar products
what is the limitations of price skimming
may discourage potential customers from buying
may encourage more competitors to enter the market
what is the meaning of promotional pricing
when product is sold at a very low price for a short period of timw
