PRICING STRATEGIES

Question 1

PRICING STRATEGIES

Answer 1

1. penetration pricing
2. psychological pricing
3. cost plus pricing
4. predator pricing
5. competitor pricing
6. price skimming

Question 2

PENETRATION PRICING

Answer 2

• price is set low in order to gain market share

Question 3

ADV + DIS OF PENETRATION PRICING

Answer 3

ADV - increases market share ( long term )

DIS - lower profit because price is set low

Question 4

PSYCHOLOGICAL PRICING

Answer 4

• pricing an item to make it appear better value than it is ( e.g £9.99 not £10.00 )

Question 5

ADV + DIS OF PHSYCOLOGCIAL PRICING

Answer 5

ADV - business charges prices that seem cheap ( attract )

DIS - business may be missing out on small amounts of money because they charge less

Question 6

COST PLUS PRICING

Answer 6

• a percentage marked-up is added to unit cost of producing an item

Question 7

ADV + DIS OF COST PLUS PRICING

Answer 7

ADV - business knows costs are covered

DIS - prices are generally competitive

Question 8

PREDATOR PRICING

Answer 8

• a strategy of sustained low prices designed to get a competitor out of the business

Question 9

ADV + DIS OF PREDATOR PRICING

Answer 9

ADV - business can force other businesses to go out of the market = less competitors
DIS - it is illegal, may get prosecuted

Question 10

COMPETITOR PRICING

Answer 10

• pricing matching your nearest competitor

Question 11

ADV + DIS OF COMPETITOR PRICING

Answer 11

ADV - selling prices should be in line with competitors, so price would not be a disadvantage
DIS - business needs new methods to gain customers ( if not enough power = not able to set price above competitors)

Question 12

PRICE SKIMMING

Answer 12

• setting a high price initially and then lower it down ( price set high when it launches to maximize profit )

Question 13

ADV + DIS OF PRICE SKIMMING

Answer 13

ADV - new product so little or no competitors

DIS - cannot last for long as competitors soon launch rival products