Price Flashcards
What is Price mean?
Organisations must ensure they set the correct price for their products. This can be impacted by many factors.
What are some of Factors Affecting the Setting of a Products Price?
How much production cost.
How much profit the business wishes to make.
What competitors are charging.
Whether the product has a strong brand.
Once all these factors have been taken into account, organisation may use a pricing strategy in ofer to arrive at their final selling price.
What are the 7 Price Strategies?
Low Price
High/Premium Price
Competitive
Cost Plus Profit
Psychological
Destroyer
Price Skimming
What does Low Price mean?
Settings price that is lower than competitors. (For example, if a competitor charger £4.00 the business might charge £3.50).
What does High/Premium Price mean?
Setting a price higher than most other similar products in order to create the image of quality.
What does Competitive mean?
Setting prices in line with your competitor. (You cannot agree to charge to same-that’s illegal-but you can react to your competitors changing their price and make yours the same).
What does Cost Plus Profit mean?
Totalling up the cost of production for the product and adding on a fixed percentage to reach the selling price. (Cost+Profit=Selling Price).
What does Psychological mean?
Charging a price which makes the customer think the product/service is cheaper than it actually is. (For example, charging £9.99 instead of £10).
What does Destroyer mean?
Setting price artificially low for a short period of time in order to gain market share from competitors. Competitors may be forced to lower their prices too or move out of the market.
What does Price Skimming mean?
Setting prices very high for a new/innovate product onto the market. Prices will be lowered over a period of time as the product becomes less popular/out of date. (For example, game consoles are expensive when launched then decrease in price over a period of time).
