pricing Flashcards
What is the main advantage of Price Penetration?
Can persuade target market to try your product/service even if they have brand loyalty
Helps a new product enter a highly competitive market.
What is a key disadvantage of Price Penetration?
Low revenue in short term with no guarantee that customers will keep buying when the price goes up in the long term.
Price Penetration is appropriate for which type of market?
Very competitive markets and low added value ‘consumables’
Examples include tea, washing up liquid, biscuits, pasta.
What is the primary advantage of Cost-plus Pricing?
Simplest form of pricing that ensures revenue covers costs.
What is a significant disadvantage of Cost-plus Pricing?
If costs are higher than the price that the target market is willing and able to pay, no sales will be made.
Cost-plus Pricing is appropriate for products/services with what characteristics?
Strong USP / little competition where there is a perceived NEED for the product.
What is the formula for Total Cost?
Total cost = variable costs + fixed costs.
What does Price Skimming attract?
Two waves of customers who respond to different prices.
What is a risk associated with Price Skimming?
Risk of losing sales to competitors with lower prices.
Price Skimming is suitable for what type of products/services?
High added value products/services with ‘luxury’ and ‘exclusive’ brand identity.
What affects a business’s ability to set its own price?
The level of competition for the product/service.
What should pricing strategies consider?
Income levels of target market, price of competitors’ products, cost of production, uniqueness of the product, brand values.
What is the main advantage of Competitive Pricing?
Attracts customers without needing a USP.
What is a disadvantage of Competitive Pricing?
Potentially lower profits; may not cover costs of production.
Competitive Pricing is appropriate for which type of products?
Products with weak USP and lots of competition.
