Marketing- Pricing

Question 1

What is price?

Answer 1

This is how much consumers will be charged for the product.
The price will affect the buying decisions of the customers so it is important to chose the right price at the right time for each group of customers

Question 2

Name 3 long term pricing strategies

Answer 2

High/ premium price
Low price
Market/ competitive price

Question 3

Name 4 short term pricing strategies

Answer 3

Skimming
Penetration
Promotional
Destroyer

Question 4

Describe premium pricing, is it short or long term?

Answer 4

Long term
Price is set higher than competitors to give the image of quality and exclusiveness
The product has to appeal to consumers looking for a particular image

Question 5

Describe low price pricing, is it short or long term?

Answer 5

Long term
The price is set lower than competitors to attract customers to the product
Used for value for money products

Question 6

Describe market/ competitive pricing, is it short or long term?

Answer 6

Long term
Price is set at the same level of competitors
Normally used for products that are identical
Other elements of the marketing mix are used to compete

Question 7

Describe skimming pricing, is it short or long term?

Answer 7

Short term
The price is set high initially when no competition exists
When competitors enter the market the price is lowered to the market price
This is used when the product is new or unique

Question 8

Describe penetration pricing, is it short or long term?

Answer 8

Short term
Price is set slightly lower than competitors to attract customers
Used to entice customers from other brands
Once a customer base has been created the price is slowly increased to the same as competitors

Question 9

Describe promotional pricing, is it short or long term?

Answer 9

Short term
A low price is set for a short period of time to boost sales in the short term
Sometimes a loss can be made on the product

Question 10

Describe destroyer pricing, is it short or long term?

Answer 10

Short term
Price is set very low compared to competitors
Once there is no competition in the market the price is then put back to the normal market level or higher
This is mainly used by large organisations to destroy competition

Question 11

Name 3 alternative pricing strategies

Answer 11

Psychological pricing where the price appears lower than it really is e.g. £3.99

Cost plus pricing where price is set by adding a percentage to the cost of production

Discriminatory pricing where there business will charge different prices to different customers for basically the same thing e.g. Train tickets

Question 12

What is the loss leader pricing/ promotional strategy?

Answer 12

Supermarkets use promotional pricing for some of their sales lines as loss leaders, these low prices will attract customers into the store. The supermarket hopes that they will buy a whole range of other products at the same time, meaning that although a loss may be made on these loss leader products, profits will be increased overall