Pricing methods and impacts Flashcards
What is price skimming
Charging a high price to see if customers are willing to pay that price this maximises revenue
Give some examples of business opportunities
Opportunity to: Open or expand a business Get sponsors Merge a business Create a new product Improve employee skills
Define price
The cost of a product or device paid by the customer (the value put onto the item)
What are the pricing methods?
Price skimming
Price penetration
Cost plus pricing
Competitive pricing
Define competitive pricing
Setting the price of a product based on what competitors charge for a similar product
What influences price
- quality
- market segmentation suitability
- product life cycle stage
- competition
- technology
Give one advantage of price penetration
Helps to reach a wider market faster or from the outset of the release of the product
One disadvantage of price skimming
Damaged reputation can occur
Disdvantage of price penetration
Selling large amounts at low prices may lead to a loss
Advantage of cost plus pricing
Recovering production costs
Advantage of loss leader pricing
Sales can increase
Advantage of competitive pricing
Customers would be more willing to buy your product rather than another businesses
Advantage of price skimming
Recovers research and development and other costs while still collecting profit from the introduction
Define price penetration
When product price is set low to reach a wide market from the outset
Disadvantage of cost plus pricing
Competitor prices may be better
