Pricing Strategies

Question 1

What are pricing strategies?

Answer 1

the approach which a business decides on for setting the price of its products or service

Question 2

What are the pricing strategies?

Answer 2

price skimming
competitive
predatory
cost plus
psychological
penetration
loss leader

Question 3

What is cost plus pricing?

Answer 3

Involves adding a certain percentage to the average total cost of production. Usually around the 10% mark

Question 4

What is price skimming?

Answer 4

Means charging a very high price then lowering it over time

Question 5

What is competitive pricing?

Answer 5

meaning charging the same or a little less than prices of competitors

Question 6

What is penetration pricing?

Answer 6

used to enter new markets. A lower price than the competition is set to try and gain large initial market share

Question 7

What is psychological pricing?

Answer 7

used to make the price seem more attractive than it actually it by rounding it down.

Question 8

What is predatory pricing?

Answer 8

tactics used by a dominant business to reduce competition. Prices are set at a low level below costs of production intended to drive competitors and new entrants

Question 9

What are positives and negatives of cost plus?

Answer 9

+ always profit

- doesn’t consider competition

Question 10

What are positives and negatives of price skimming?

Answer 10

+ initial high costs cover r and d costs, helps establish exclusivity and innovation
- customers may be put off, quality perception may deter over time

Question 11

What are positives and negatives of competitive?

Answer 11

+ lower prices causes sales uplift and increased number of customers
- competitors could price themselves lower

Question 12

What are positives and negatives of psychological?

Answer 12

+ increased sales, don’t exceed price elastic consumer barriers
- reduction in profit margin, if higher could make more

Question 13

What are positives and negatives of penetration?

Answer 13

+ quick market share gain, low prices will attract customers, increased brand loyalty
- can originally damage quality, competitors may reduce prices making it difficult to increase

Question 14

What are positives and negatives of predatory pricing?

Answer 14

+ drive competition out of the market, more sales

- illegal, short-term loss,

Question 15

What are positives and negatives of loss leaders?

Answer 15

+ gain sales and footfall

- short term losses

Question 16

What is loss leader pricing?

Answer 16

pricing your product at a loss in order to gain footfall and sales uplift of other products

Question 17

What do pricing strategies depend on?

Answer 17

competition
size
PED
shareholder views
production cost
contingency plans
stage in product life cycle.

Question 18

What is the office of fair trading?

Answer 18

responsible for investigating suspected abuses of monopoly powers and going into prohibited pockets

Question 19

What does the OFT investigate?

Answer 19

collusive behaviour

abuse of market power

Question 20

What is collusive behaviour?

Answer 20

2 or more businesses deciding to set prices higher in order to drive out competition.