Price In The Marketing Mix Flashcards
What is cost-based pricing?
It means adding a percentage profit margin to the cost of supplying
a good or service. It is also called COST-PLUS PRICING.
Advantage: You know you make a profit on each item sold.
Disadvantage: It might be too expensive for some customers.
What is competition-based pricing?
It means setting a price based on the prices charged by competitors for similar products.
Advantage: You won’t lose customers by being more expensive than other businesses.
Disadvantage: You might not be able to cover your costs, especially if a smaller business.
What is penetration pricing?
It means setting a low price for a new business or product in order to attract customers. The price is likely to be raised as the product or business becomes popular.
Advantage: It attracts customers away from your competitors.
Disadvantage: Less revenue due to low prices.
What is skimming pricing?
It means selling a product at a high price because there is no competition. It is often used with new innovations, and the price comes down when competitors have developed similar products. It is also called CREAMING.
Advantage:
More revenue from charging high prices
Disadvantages:
Some consumers will not buy the products because the prices are too high. Eventually alternatives will be available at lower prices.
What is price discrimination?
It means charging different prices for the same product to different groups of consumers.
Advantage: More revenue due to some market segments paying higher prices.
Disadvantage: Customers may not be willing to pay higher prices if they think it is unfair.
What is a loss leader?
It is a product that is sold at a loss in order to attract customers to buy other
products being sold at their full price
Advantage: It can attract a lot more customers to buy other products.
Disadvantage: You lose profit on the products that are being sold at a loss
What is psychological pricing?
It means charging just below a significant figure to make the price more attractive (e.g. £9.99, £19.99, £99.99)
Advantage: Apparently it work for some people Disadvantage: It doesn’t work for other people
