Pricing Flashcards
what are some factors a business must take into account when setting a price
price competitors charge
place it is sold
time of year
market segment product aimed at
what may happen if a price is lowered
may increase customer demand, but if lowered too much customers may think product is poor quality
what are the pricing strategies that can be used by a business
cost plus
premium
skimming
penetration
price discrimination
destroyer
loss leaders
promotional
psychological
what is cost plus pricing
firm calculates cost of producing a good, then adds a percentage to that to give the selling price
what are the advantages of cost plus pricing
easy to work out price to be charged
profits can be calculated easily
what are the disadvantages of cost plus pricing
product could be sold at higher price depending on market demand
what is premium pricing
high price set for a good/service, and is maintained to create exclusive image for the product
what are the advantages of premium pricing
perception amongst customers that the product is luxury
manufacturer can restrict amount sold, giving it further luxury status
what are the disadvantages of premium pricing
expensive to maintain premium status
premium products are wants, and not always necessary in a customers eye
what is market skimming pricing
business launches product at high price, and price lowered over time as sales slow
when is market skimming most effective
when there are few to no competitors in the market
what are the advantages of market skimming pricing
gives the product a luxurious image that attracts customers
can increase profits in the long term
what are the disadvantages of market skimming pricing
can slow down market growth in long term as customers wont pay for high prices
gives competitors chance to develop products at lower prices
what is penetration pricing
setting a low price to penetrate a market, and after product established, price raised
what are the advantages of penetration pricing
increased market share of the product
can mean higher profits in the long term
what are the disadvantages of penetration pricing
can mean lower profits at beginning
can be difficult to raise the price in a competitive market
what is discrimination pricing
when prices are charged to different groups of customers for the same product/service
what are the advantages of discrimination pricing
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
what are the disadvantages of discrimination pricing
customers may object to being charged different prices from others
