Pricing Strategies

Question 1

List 3 influences on pricing

Answer 1

1.Costs
2.Elasticity of Demand
3.Competitors

Question 2

What is Price Skimming

Answer 2

This involves setting an initial high price to maximise profit and lowering it overtime.

Question 3

What is Penetration pricing

Answer 3

Offering a product at a low introductory price.

Question 4

What is the aim of penetration pricing

Answer 4

1. Gain market share quickly.
2. Build customer usage and loyalty.
3. Build sales of higher price related items (hook and bait)

Question 5

What is psychological pricing

Answer 5

A strategy that uses consumer habits to influence spending.

Question 6

What is competitive pricing

Answer 6

Each firm seeks to increase market share by reducing prices. Basing prices off what other competitors in your market are charging.

Question 7

What is predatory pricing

Answer 7

When a company significantly reduces their prices below all competitors prices. This is in order to blow smaller businesses out the water.

Question 8

How do you calculate ‘mark up’

Answer 8

Selling price=Cost+mark up