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Higher Business > Pricing > Flashcards

Pricing Flashcards

1
Q

what are some factors a business must take into account when setting a price

A

price competitors charge
place it is sold
time of year
market segment product aimed at

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2
Q

what may happen if a price is lowered

A

may increase customer demand, but if lowered too much customers may think product is poor quality

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3
Q

what are the pricing strategies that can be used by a business

A

cost plus
premium
skimming
penetration
price discrimination
destroyer
loss leaders
promotional
psychological

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4
Q

what is cost plus pricing

A

firm calculates cost of producing a good, then adds a percentage to that to give the selling price

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5
Q

what are the advantages of cost plus pricing

A

easy to work out price to be charged
profits can be calculated easily

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6
Q

what are the disadvantages of cost plus pricing

A

product could be sold at higher price depending on market demand

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7
Q

what is premium pricing

A

high price set for a good/service, and is maintained to create exclusive image for the product

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8
Q

what are the advantages of premium pricing

A

perception amongst customers that the product is luxury
manufacturer can restrict amount sold, giving it further luxury status

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9
Q

what are the disadvantages of premium pricing

A

expensive to maintain premium status
premium products are wants, and not always necessary in a customers eye

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10
Q

what is market skimming pricing

A

business launches product at high price, and price lowered over time as sales slow

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11
Q

when is market skimming most effective

A

when there are few to no competitors in the market

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12
Q

what are the advantages of market skimming pricing

A

gives the product a luxurious image that attracts customers
can increase profits in the long term

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13
Q

what are the disadvantages of market skimming pricing

A

can slow down market growth in long term as customers wont pay for high prices
gives competitors chance to develop products at lower prices

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14
Q

what is penetration pricing

A

setting a low price to penetrate a market, and after product established, price raised

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15
Q

what are the advantages of penetration pricing

A

increased market share of the product
can mean higher profits in the long term

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16
Q

what are the disadvantages of penetration pricing

A

can mean lower profits at beginning
can be difficult to raise the price in a competitive market

17
Q

what is discrimination pricing

A

when prices are charged to different groups of customers for the same product/service

18
Q

what are the advantages of discrimination pricing

A

can maximise profits as highest prices charged for those who can pay
equalises demand for products that make it easier for business to cope at busy times

19
Q

what are the disadvantages of discrimination pricing

A

customers may object to being charged different prices from others

Higher Business (20 decks)

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