Module 6 - Pricing Flashcards
A price sends signals to customers about what?
Quality, exclusiveness, availability etc.
How can Price be a powerful weapon?
Can drive out competitors,
Create barriers to entry for potential new competitors
Force “price-following” behaviour
How can info be gathered to get a more accurate price?
Historical data analysis
Pricing experiment
Pilot marketing studies
Market research
What is cost plus pricing
You add a mark-up on top of the cost of the product. This strategy aims to make sure a business covers its costs and makes a profit
Why can cost plus pricing be bad?
Over simplification
Eg assume no one else in the market will react
What is target pricing?
Start from the level of funding the business has and the level of return that it needs to make,
Then work backwards to determine the selling price needed to achieve this
Other pricing strategies?
Market skimming
Premium pricing
Market penetration
Limit pricing
Dynamic pricing
Freemium
Loss leader
Pay what you want
How does market skimming work?
Start high then lower
How does premium pricing work?
Set and keep high prices
How does market penetration work?
A new product is priced a low level then price increases
How does Limit Pricing work?
Set profits low to create a barrier for entry
What is dynamic pricing?
Change prices depending on different times of year - eg flights
What is freemium?
Eg fortnite / razors and blades
What is a loss leader?
Sell a product at a loss to attract customers and then get them to buy other stuff
What is Pay What You Want?
Allows customers to pay what they want
Psychology pricing - common techniques used to affect consumers reactions
Price anchoring
The power of 9
Decoy pricing
What is price anchoring?
Products are placed next to other more expensive ones - to make them look cheaper
What is the power of 9
Eg £1.99
What is decoy pricing
Make it seem like the best value there when it’s not actually really good value itself - popcorn pricing
When may a business need to change the price of a product?
In response to competitors actions
If a competitor reduces its price (potentially to gain market share), what strategies are available to remaining companies in that market?
Maintain the current level of price (only in certain circumstances where competitors change is not really a threat)
Maintain current level of price but adopt alternative marketing strategies - find another USP
Reduce prices
Can prices change as a product moves through the life cycle? (May be worded as “do” in the exam)
Yes
What tends to happen in terms of demand when price goes up
Demand tends to go down
What tends to happen when prices go down?
Demand goes up