The marketing strategy: Price

Question 1

Price

Answer 1

The amount of money that a customer needs to give up in order to obtain a product

Question 2

Cost-plus pricing

Answer 2

This is a pricing method that adds a percentage to the cost of making a product to give its selling price

Question 3

Cost plus pricing advantages

Question 4

Cost plus pricing disadvantages

Question 5

Competitor pricing

Answer 5

This is when a price is set based on pries charged by competitor businesses for a similar or identical product. This price is often lower in order to gain sales from rivals.

Question 6

Competitor pricing advantages

Question 7

Competitor pricing disadvantages

Question 8

Marginal pricing

Answer 8

It is based on the assumption that since fixed and variable costs are covered by the current output level, the cost of producing a extra unit will compromise only of variable costs.

Therefore any amount of the selling price that exceeds the variable costs caused by the marginal output will be profit.

Question 9

Marginal pricing advantages

Question 10

Marginal pricing disadvantages

Question 11

Contribution

Answer 11

• Price is set on the variable cost of production or buying a product.
• To ensure the selling price generates an acceptable CONTRIBUTION towards covering the fixed costs of a business

Question 12

Contribution pricing advantages

Question 13

Contribution pricing disadvantages

Question 14

Price skimming

Answer 14

It involves setting a high price to maximise profits during the initial stages of the product life cycle

Question 15

Price skimming advantages

Question 16

Price skimming disadvantages

Question 17

Penetration pricing

Answer 17

When a business is new to the market, a price is set lower than competitor business. This is a short term strategy to break customer loyalties from big brands.

Question 18

Penetration pricing advantages

Question 19

Penetration pricing disadvantages

Question 20

Psychological pricing

Answer 20

physiologically it looks cheaper and more appealing to the customer e.g. £9.99.

Question 21

Psychological pricing advantages

Question 22

Psychological pricing disadvantages