Pricing Topic 2.4 Flashcards
What is cost plus pricing
calculating the cost of producing the item and then adding on the percentage profit required by the company
What is promotional pricing
a sales strategy in which brands temporarily reduce the price of a product or service to attract prospects and customers.
What is competitor pricing
businesses set prices based on their competitors’ prices
What is price skimming
Setting a high price and then lowering it over time
Penetration pricing
designed to help a new product penetrate, or become known, within the market.
2 Advantages and disadvantages of cost plus pricing
A- ensures a profit is made
A- easy to calculate
D-May not reflect the true value of the product/service
D-May miss out on opportunities to maximise revenue
Advantages and disadvantages of price skimming
A-Early adopters offer organic word-of-mouth advertising for your new product.
A-You’ll potentially see higher returns on your investment by maintaining interest for longer.
D-The quality of your new product or service must justify the higher price to be effective.
D-You may end up with excess inventory if price skimming efforts fail.
Advantages and disadvantage of penetration pricing
A-encourage people buying similar products to purchase theirs
A-encourages new customers to buy their product
D-high risk ( requires large up front investment)
D-cam set unrealistic pricing expectations
2 advantages and disadvantages of promotional pricing
A- creates urgency, encourages buyers to spend
A-creates new customers as a big, fat sale sign is enough to attract their glance
D-greatly affect your customers’ price perceptions and loyalty
D-customers become so used to the low pricing, and keep that parameter above the quality of the product
2 advantages and disadvantages of competitor pricing
A-easy to use
A-low risk
D-decreases potential profits
D-doesn’t focus on the customer
