Price - 112

Question 1

Penetration pricing

Answer 1

The objective is to gain market share (gain customers from competition). It involves pricing a product at a low level so that retailers and consumers are encouraged to purchase the product in large quantities.

Question 2

Price skimming

Answer 2

setting a high price to maximise profits on each product for a limited period of time. Aim is to gain as much profit as possible for a new product while it is still unique.

Question 3

Cost plus pricing

Answer 3

A profit percentage is added to the average cost of producing the good. This is known as adding a mark-up. Therefore, if the production costs of the good are £1, and the business adds a profit percentage of
40%, then the business will sell the good at £1.40

Question 4

competitive pricing

Answer 4

prices its products based on competition. It could include a range of strategies:
*going rate - based on competitors prices’
*loss leader pricing - selling products at a loss in hope of generating sales elsewhere in the business
*Destroyer pricing - setting a price low enough to drive competitors out of the market
*Dynamic pricing

Question 5

Contribution pricing

Answer 5

price will be based on the variable costs plus a contribution towards
overheads and profits. Price the product to cover the variable costs rather than to make a profit.

Question 6

Psychological pricing

Answer 6

lower than a whole number e.g.£9.99, to make customer believe they are getting good value for their money