Pricing Strategies (continued) Flashcards
Explain markup pricing
The difference between the retail or wholesale price and the cost of an item
The markup must be high enough to cover expenses and ensure a product
Give an example of markup pricing
Ex. Retailer - Dollarama
Ex. Wholesaler - Costco
Explain cost-plus pricing
Pricing products by calculating all costs and expenses and adding in desired profit
Give an example of cost-plus pricing
Ex. Service - Tennis lessons
Describe what skimming is
When introducing a new product, marketers will price the item high to recover the costs of development
Describe what penetration is
Price the item low to create immediate demand for the product
Describe how companies can price their products/services after analysing their competition
They lower their prices to draw customers away from the competition
Explain price lining
Selling all goods in a product line at specific price points
Easier for customers to make purchasing decisions
Give an example of price lining
Ex. A business may decide to sell its basketballs at 3 price points - $9.99, $19.99, $29.99
Explain bundle pricing
Selling several items as a package for a set price
Products individually would cost more than the package price
Give an example of bundle pricing
Ex. Combo vs buying all separately
Explain loss-leader pricing
Pricing an item at cost or below cost to draw customers into the store
Idea is to get consumers into the store and to buy additional products
Explain yield management pricing
Pricing items at different prices to maximize revenue when limited capacity is involved
Give an example of yield management pricing
Ex. Seating in an arena. Some seats are priced higher than others due to their location or the time they are purchased
Explain what tiered pricing is
Charging more for tickets to home games against more competitive opponents
