Measuring The Potential Success

Question 0

Demand based pricing

Answer 0

Equilibrium, when demand meets supply

Question 1

Estimating sales, costs and profits

Answer 1

Most not be too ambitious

Don’t confuse customer aspirations with sales, must be backed up with the ability to pay

Question 2

Competitor pricing

Answer 2

Similar levels as competitors

Question 3

Psychological pricing

Answer 3

£9.99 rather than £10

Question 4

Skimming

Answer 4

Introducing the product at a high price, then gradual long bringing it down

Question 5

Cost-plus pricing

Answer 5

Costs to make the product plus a bit more

Question 6

Penetration pricing

Answer 6

Pricing product extremely low to gain market share, then raising it

Question 7

Differential pricing

Answer 7

Charging different people different prices

E.g OAPs, students, adult, child

Question 8

Promotional pricing

Answer 8

Reduction in price to get rid of surplus stock

Question 9

Premium pricing

Answer 9

High prices but with good quality products

Question 10

Destroyer/ Predatory pricing

Answer 10

Setting prices so low it puts competitors out of business

Question 11

The point in break even…

Answer 11

To see whether it is reasonably achievable bearing inmind potential demand

Question 12

Contribution

Answer 12

Selling price -variable cost per unit

Question 13

Break even revenue

Answer 13

Total fixed costs + total variable costs=total sales revenue at a given level of output

Question 14

Margin of safety

Answer 14

Different between the no. of units currently sold to the units needed to break even

Question 15

Position where gross and operate profits go.

Answer 15

Sales revenue
Costs of sales
GROSS PROFITS
Operate costs
OPERANT PROFIT

Question 16

Other things in profit and loss…

Answer 16

Exceptional items
Net interest
Corporation tax
Dividends