Pricing

Question 1

What is a price setter?

Answer 1

A firm that has a lot of choice when setting their selling price

Question 2

What is a price taker?

Answer 2

Firms that have little or no influence over the prices of their products or services

Question 3

What are the stages of a product life cycle?

Answer 3

Introductory (minimal sales)
Growth (sales are booming)
Maturity (sales begin to slow down)
Decline (Sales dimish)

Question 4

What are some pricing strategies? And their considerations

Answer 4

1. Cost plus pricing - the cost of the product is first established and then a mark up is added to earn the desired Profit
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2. Target costing - we determine the price that customers are prepared to pay for the product. Deduct the target profit margin. Estimate the actual cost. Look for ways to push cost down to achieve desired profit
3. Price skimming - higher initial prices are set to exploit the Portion of market who are insentive to price changes and prices reduced later
4. Penetration Pricing - Low prices are set to gain rapid acceptance of product (useful when close substitutes exist) and increase prices later
5. Loss leading - using a product set at low price in order to attract customers to company to make profits off other products and services.