Marketing-Price Strategies

Question 1

Cost based pricing

Answer 1

Fixed sum of total cost added to the cost of the product in order to get to a selling price

Question 2

Mark up pricing strategy

Answer 2

Business take the price they payed for the product and add a percentage mark up to get to the selling price

Used by retailers

E.g add 70%

Question 3

Target pricing strategy

Answer 3

Sets a price that will give a required rate of return at a certain level of output

Setting a target that is too high can reduce comptetitivess

Target 1000 sell 100 at 20 unit price set at 30

Question 4

Contribution cost pricing/ mark up

Answer 4

Pricing set based on variable costs of making a product in order to make contribution towards fixed costs and profit.

If enough units are sold then the total contribution will be enough to cover fixed costs and to return profits

Variable cost -4 contribution - 2 price per unit 6

Question 5

Full cost pricing

Answer 5

Sets price by calculating unit cost for product and then adding a fixed profit margin

Not the same mark up as here it focuses of the fixed costs among the various products being sold