Marketing mix- Price

Question 1

What are the 7 P’s:

Answer 1

Product, Price, Place, Promotion, Physical evidence, Process and People

Question 2

Price:

Answer 2

How much the business charges for the quality of the goods (depends on how much customers are willing to pay)

Question 3

What are the different pricing strategies?

Answer 3

• Cost plus
• Skimming
• Penentration
• Price discrimination
• (Destroyer) (set extreamly low-illegal)
• Loss leader
• Promotional
• Phychological
• Premium
• Low
• Competitive

Question 4

Cost plus:

Answer 4

The business calculates the percentage costs of the product and adds a mark-up
All costs are covered but may not cover indirect costs e.g. rent

Question 5

Skimming:

Answer 5

The price is set HIGH to begin with then is lowered over time
This can be used on new products as high prices are charged for a short time but the initial prices may put some people off

Question 6

Penentration pricing:

Answer 6

The price is set LOW and increases over time (highly competitive markets to achieve high market share)
Encourages customers but little profits generated

Question 7

Price discrimination:

Answer 7

This is when prices are altered depending on discriminatory factors such as age (e.g. cinema/train tickets)
Ensures products appeal to different market segments

Question 8

Loss leader:

Answer 8

When products are set to be unprofittably low to entice customers to buy other products
Encourages repeat purchases but risk customers will only buy loss leader

Question 9

Promotional pricing:

Answer 9

Lower price than normal for a short period of time
It is bought more by customers and may renew interest but revenue is lower

Question 10

Psychological:

Answer 10

Making customers tink the product is cheaper than it actually is e.g. 99p
More customers buy it however its become more popular in businesses

Question 11

Premium:

Answer 11

Price set permanently high to give exclisicity
Customers believe high quality but may be unwilling to buy bue to price

Question 12

Low:

Answer 12

Price is permanently lower than competitors
Value for money however may lose sales as customers think price reflects quality

Question 13

Competitive:

Answer 13

Price set similar to competition to avoid price wars in the market

Question 14

What are factors that may affect the pricing strategy used?

Answer 14

• Target market
• Demand
• Business objectives
• External factors
• Cost of product
• Competition
• Quality of product