Marketing Mix -Price

Question 1

What is meant by price ?

Answer 1

Price is the amount of money that customers have to pay exchange for the product or service

Question 2

Why is price important to customers

Answer 2

Price is important because it represents the marketers assessment of the value customers see in the product or service and are willing to pay for a product or service

Question 3

What are the different factors that affect the price that is set for a business product?

Answer 3

The level of competition: the more intense the competition in the industry is the more flexible the pricing strategy and policy will be.

Perceived value of the product: customers occasionally associate low price with low quality.

Customer perception value: how much the customer is willing to spend.

Question 4

What is price elasticity of demand ?

Answer 4

Price elasticity of demand measures the responsiveness of quality demanded for a product to a change in price.

Question 5

What are the 3 important components when pricing?

Answer 5

1. Cost
2. Value
3. Price

Question 6

What are loss leaders ?

Answer 6

A product that is sold at a loss to attract customers

Question 7

What is meant by price taker ?

Answer 7

A company that must accept the ol prevailing prices in the market of its own products , it’s own transactions being unable to affect the market place.

Question 8

Name the different pricing strategies

Answer 8

Penetration pricing 
Cost plus pricing 
Differential pricing 
Skimming pricing 
Competitive pricing 
Psychological pricing

Question 9

What is penetration pricing ?

Answer 9

Penetration pricing is usually to increase market share of a product. The business sets its price as low as possible to attract customers, the price will increase over time hoping that customers will remain loyal

Question 10

What are the Advantages of penetration pricing

Answer 10

Advantages:
Entry barrier: if a company continues with the penetration pricing strategy , possible new entrants in the market will be deterred by the low prices.

Reduces competition: financially weaker competitors will be driven from the market or into smaller niches

Question 11

What are the disadvantages of penetration pricing?

Answer 11

Customer loss: if a company only engages in penetration without improving its product quality or services, customers will leave when it raises it prices.

Perceived value: if a company reduces prices substantially, it creates a perception among customers that the product or service is no longer as valuable, which may interfere with any later actions to increase prices