Price (Marketing Mix) Flashcards

1
Q

Types of pricing strategies

A

Price skimming
Price penetration
Cost plus pricing
Competitive pricing

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2
Q

Price skimming

A

When you price higher initially and it lowers over time

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3
Q

Price penetration

A

When a business tries to increase market share by lowering its price

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4
Q

Cost plus pricing

A

The cost of manufacturing the product plus a profit mark-up

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5
Q

Competitive pricing

A

When a product is priced in line or just below competitors’ prices (to try to capture more of the market)

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6
Q

What determines a price

A

Costs
Product life cycle
Degree of competition
Quality of the product

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7
Q

Advantages of price skimming

A

Maximise revenue
Covers fixed cost quickly
Your product is seemed higher quality

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8
Q

Disadvantages of price skimming

A

Slower sales
People may think its to high
Competitiors may sell for cheaper

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9
Q

Advantages of price penetration

A

Increases market share
Attracts customers
Switches customers from competitors

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10
Q

Disadvantages of price penetration

A

Your product may seem low quality
Short term profits
Risky if customers have brand loyalty to your competitors
Customers may get used to the low prices, harder to set higher prices in the future

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11
Q

Advantages of cost plus pricing

A

Easily can cover costs
Easy to work out and use

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12
Q

Disadvantages of cost plus pricing

A

Ignores market conditions and customers wants
Competitors may have lower prices

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13
Q

Advantages of competitive pricing

A

Have on edge over your competitors, increase market share

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14
Q

Disadvantages of competitive pricing

A

Ignores customers
you might risk selling at loss
Risky if customers have brand loyalty
Pricing is not unique

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15
Q

Promotional pricing

A

When a product is sold at a low price for a short period of time to increase short term sales

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16
Q

Dynamic pricing

A

When business change product prices depending on the level of demand

17
Q

Price elastic demand

A

When consumers are very sensitive to changes in prices and the percentage change of products demanded/bought is greater than the percentage change in price

eg: prices increase by 5% then sales decrease by 15% = falling revenue for the business

This usually happens when the product is common on the market so consumers can easily buy a cheaper version of it (eg: chocolate bars)
Therefore its better to decrease prices to increase revenue

18
Q

Price inelastic demand

A

Where consumers are not sensitive to changes in the prices
The percentage change in quanity demanded/bought is less than the percentage change in price

Prices increase by 15% then sales decrease by 5% = increase revenue for the business

This usually happens to products that are not common on the market (have less competitors) so consumers cant really chose a cheap option and it may be just easier if they stick to buying the product
Therefore its better to increase prices to increase revenue