price: pricing strategies Flashcards
what is a pricing strategy?
used to determine what price to charge
why are there 5 main strategies?
it depends on the product, level of competition and the demand for products and services
penetration pricing:
what is it?
when enterprises ask a low price when the product is launched
penetration pricing:
why may enterprise use this?
so more people become interested
penetration pricing:
what may a new gardening enterprise offer?
a grass cutting at a low price to start with
penetration pricing: advantages
1. what will it gain?
2. what will it boost?
3. what will it encourage?
4. what will it increase?
- gains interest
- boosts sales
- encourages customers
- increases brand loyalty
penetration pricing: disadvantages
1. what will be low?
2. what will happen when sales fall?
3. what will customers think?
- low profit or selling at a loss
- sales may fall when the price increases
- customers may think the product is poor quality
skimming:
what is it?
when enterprises ask a high price when the product is launched
skimming:
what is one example?
high-tech products such as phones
skimming: advantages
1. how does maximising profits help?
2. what will customers think?
- help cover the development costs
- that the product is high quality
skimming: disadvantages
1. what will customers wait for?
2. what will be low?
- until the price decreases or buy from competitors who many be cheaper
- sales
competitive pricing:
what is it?
use a similar price to their competitors
competitive pricing: where is this often done?
supermarkets
competitive pricing: advantages
1. what does it stop?
sales being lost to competitors
competitive pricing: disadvantages
1. what does it not allow?
for extras that customers may be willing to pay for
cost-plus pricing:
what is it?
when enterprises work out how much the product has cost to make and then add on a percentage of profit
cost-plus pricing: what is one example?
restaurants where there is a wide choice of meals on the menu
cost-plus pricing: advantages
1. what is it easy to do?
2. what are covered?
- calculate
- costs
cost-plus pricing: disadvantages
1. how will revenue be lost?
- when customers would be happy yo pay more for the product
premium pricing:
what is it?
enterprises ask a high price for a desirable or luxury product
premium pricing: what is one example?
cars
premium pricing: advantages
1. how will maximising profits help?
2. what will it boost?
- to cover the development costs
- brand image
premium pricing: disadvantages
1. why will customers wait?
2. what will be low?
3. what may customers buy from?
- until the price decreases
- sales
- from competitors who may be cheaper