-pricing strategies- Flashcards
What are pricing strategies?
Adopted over the medium or long term to achieve marketing objectives.
Have a significant impact on marketing strategy
When setting a price, what can a business be?
Price taker: charging the ruling market price.
Price maker: able to set own price without worrying about rivals
Price leader: price changes are followed by rivals
Price follower: follows the price changing of the market leader
What is cost-plus pricing?
Where pricing takes into account the costs of production/operation and is priced more than said costs in order to make a profit.
What is cost-plus pricing?
Where pricing takes into account the costs of production/operation and is priced more than said costs in order to make a profit.
Adv of cost-plus pricing:
Easy to calculate
Price increases can be justified when costs increase
Managers can be confident that each product is being sold at a profit
Disadv of cost-plus pricing:
Ignores price elasticity of demand
May not take into account competition
Profit is lost if price is set below what customers are prepared to pay
Sales are lost if price is set above what customers are prepared to pay
What is price skimming?
Charging a premium price when a product is first launched in order to maximise revenue per unit.
What is penetration pricing?
Offering a significantly lower price than usually in an attempt to maximise volume sold and to build an installed base of product users
What are price wars?
Competitive price reductions by firms as part of the day to day competitive rivalry in the market. Pushes out weaker firms.
What is psychological pricing?
Where consideration is taken to the psychology of prices, to just the economics of pricing, e.g pricing something at £1.99 rather than £2
What is a loss leading?
A product which is sold at a low (even loss making) price in order to encourage customers to buy other full price products from the business along with the loss leader product
What is dynamic pricing?
Where flexible prices are set based on current market demands.