Pricing

Question 1

what kind of product can you use penetration price skimming on

Answer 1

new

Question 2

what is penetration pricing

Answer 2

low prices when a product is first launched in order to obtain strong demand for the product as soon as its launched.

Question 3

what is price skimming

Answer 3

price skimming involves charging high prices when a new product is launched in order to maximize short term profitability

Question 4

why is penetration pricing useful (4)

Answer 4

discourage new entrants
to shorten the initial period of the products life cycle
economies of scale can be achieved
demand is highly elastic

Question 5

why is price skimming useful (4)

Answer 5

product is new and different
strength of demand is unknown
might generate high initial cash flow
product has a short life cycle so need to make a profit quickly

Question 6

what is price discrimination

Answer 6

the practice of charging different prices for the same product to different groups of buyers (ie gyms peak and off peak)

Question 7

what is product line pricing

Answer 7

a product line may be a range of branded products and a consistent pricing policy must be applied

Question 8

what is complementary product pricing

Answer 8

goods that tend to be bought together ie, coffee machine and coffee pods. One is priced competitively and the other more expensive

Question 9

what is volume discount

Answer 9

a reduction in price given for larger than average purchases