pricing strategies

Question 1

pricing strategies

Answer 1

methods used by an organisation to price a product in order to achieve their marketing objectives

Question 2

what is price skimming

Answer 2

high price (short term returns) - low price (attract wider market)

Question 3

pros of price skimming

Answer 3

allows business to set premium price for those willing to pay = earn high profit margin = keep high development costs

Question 4

drawback of price skimming

Answer 4

high price = less attractive

Question 5

what is price penetration

Answer 5

low price (attract attention & gain market share) - high price

used in mass market e.g. gym prices

Question 6

what is some pros for price penetration

Answer 6

• good strategy to gain interest and market share

Question 7

cons of price penetration

Answer 7

• consumers unwilling to pay higher price

Question 8

what is cost plus production

Answer 8

basing selling price on cost of production

- suitable when business has degree of monopoly power e.g. from lack of competition

Question 9

pros of cost plus producion

Answer 9

help business reach unit profit targets for each sale

Question 10

cons of cost plus production

Answer 10

doesn’t take consumer preferences or competitor selling prices

Question 11

what is competitive pricing

Answer 11

setting prices based on based on competition within the market.
e.g. headphones is £200 competitor will be £199.99