Pricing strategies Flashcards
What is the aim of predatory/destroyer pricing?
Eliminate competitors from market
How do businesses Predatory/Destroyer price?
Business sell products - below cost of production - period of time - until one or more rivals leave market.
What does illegal predatory/destroyer pricing involve
Selling products below cost of production
Why is illegal predatory/destroyer pricing outlawed?
[Long term effect]
Lack of competition in market
When is predatory/destroyer pricing allowed?
Low-cost businesses - prepared to endure low profits - extended period of time.
What is competitive pricing?
Charging very similar price as competitors
after studying competitor pricing
In which type of market does competitive pricing occur?
Fiercely competitive markets
Give approach 1 of competitive pricing.
Give an advantage of this approach.
Charging same price as competitors.
>Price war = likely to be avoided
safe pricing strategy
What is competitive pricing approach 2 called?
Price leadership
Define price leadership.
Market leader sets price
>competitors follow.
Price leaders are usually
Market leaders/Dominant firms in market
How may price leaders have developed their dominance?
Give 2 possible reasons.
- Low-cost operator
- Building strong brand over time
Define pyscological pricing.
Give an example.
Setting price slightly below round figure
e.g £99.99 instead of £100.
Why might businesses use psychological pricing?
State an advantage of this.
Tricks consumers -believing product is cheaper.
>demand - more likely to increase (particularly from bargain hunters)
