Pricing strategies

Question 1

PENETRATION PRICING

Answer 1

Launch product at low price , gradually increase

Question 2

WHY USE PENETRATION

Answer 2

To capture market share

• It is hard to penetrate a competitive market because consumers already have consumer loyalty to a different product
• It gives consumers reason to buy the product as it is low price

Question 3

PRICE SKIMMING

Answer 3

Set starting price high to maximise sales revenue at initial launch

Question 4

WHY USE SKIMMING

Answer 4

• Useful when consumers have anticipation and high expectations for a product
• Hype for product means that several desperate consumers are willing to pay a premium price at initial launch
• Gradually lower price to stabilise revenue from consumers who would rather pay at a lower price

Question 5

COMPETITIVE PRICING

Answer 5

Pitching price at a similar level to other products on market

• Takes price out of the equation for consumers when making purchasing decisions

Question 6

WHY USE COMPEITIVE PRICING

Answer 6

Makes consumers base decisions on other aspects of marketing such as quality or promotion

Price maker= we are the firm that other look to when making price decisions
price taker= setting prices based on main competitor prices

Question 7

PREDATOR PRICING

Answer 7

Driving firms out of the market using extremely low price

Question 8

WHY USE PREDATOR PRICING

Answer 8

Competitors may match pricing in the short term, but wont sustain selling at such low price

Question 9

PSYCHOLOGICAL PRICING

Answer 9

Giving appearance that products are more value then they necessarily are by ending price in odd number such as £1.99

Question 10

WHY USE PSYCHOLOGICAL PRICING

Answer 10

Consumers on a budget may look for these products as it makes them feel like they have made a saving