Marketing Mix: Price Flashcards
Factors that affect price
- competitors pricing
- brand name
- cost of production
Why businesses adopt pricing strategies
- break into new markets
- increase market share
- make profits
Cost plus pricing
Manufacturing cost + profit mark up
Adv of cost plus pricing
- earn profit
- diff mark up diff market
- easy to apply
Disadv of cost plus pricing
- lose sales if price higher than competitors
- no incentive to reduce costs
Competitive pricing
Prices in line with our just below competitors
Adv of competitive pricing
- Sales likely to be high as it’s realistic
- avoid price competition
Disadv of competitive pricing
- if costs of production higher, losses made
- high quality product need to be sold at higher price
Penetration pricing
Price lower than competitors
Adv of penetration pricing
- often used for new products to create impact
- ensure sales are made
- market share build up quickly
Disadv of penetration pricing
- profit per unit may be low
- not appropriate for branded product
Price skimming
High price set for new product on market
Adv of price skimming
- establish product as high quality
- development costs recouped by profits
Disadv of price skimming
- discourage potential customers from buying
- high profitability encourage competitors to enter market
Promotional pricing
When product at at very low price for short amount of time
Adv of promotional pricing
- useful for getting rid of unwanted inventory
- help renew interest in product
Disadv of promotional pricing
- lower revenue
- might lead to price competition with competitors
Psychological pricing
Company set price based on customer attitude towards product
Dynamic pricing
When business change product price depending on level of demand
