Marketing Mix- Price

Question 1

How can you price products effectively?

Answer 1

-market research
-price must cover costs of production, delivery etc
-must be flexible

Question 2

What are price takers?

Answer 2

When there is perfect competition, accepting the market price is the only option
Goods cannot be told apart

Question 3

What are price makers?

Answer 3

There are 2 types;
Market orientated
Cost-based strategies

Question 4

Market orientated strategies for new products are: 1) price skimming

Answer 4

-Firms set a high price for a product with a USP
-generate large amount of revenue in short time

Question 5

2) price penetration

Answer 5

-firm sets low initial price
-price increases as market share increases
-aims to gain^ and loyal customers
-customers may buy in bulk, meaning advantages can be gained from economies of scale

Question 6

3) going rate pricing

Answer 6

-price is set after taking competitors prices into account
-method by new entrants

Question 7

Pricing strategies for already existing products: 1) loss leader pricing

Answer 7

• set deliberately low below the production cost
  -making a loss each product is sold
  -hope customers are attracted and buy other profitable products, eg supermarkets

Question 8

2) psychological pricing

Answer 8

-products are priced a little below the round figure eg. 8.99

Question 9

3) predator pricing

Answer 9

-deliberate strategy of driving competitors out of the market
-decreasing prices drastically
-can gain benefits from economies of scale

Question 10

Cost based strategies: 1) cost plus pricing

Answer 10

-setting price that takes into account the cost of production
-profit percentage added to average cost

Question 11

2) full cost pricing

Answer 11

-similar to cost plus but instead takes into account all the costs of the business in consideration