Unit 4.5b 7ps of marketing mix: price

Question 1

Price

Answer 1

the amount paid by a customer to purchase a good or servcie

Question 2

Loss leader pricing

Answer 2

Loss leader pricing involves setting the price of a good or service below its costs of production. The purpose is to entice customers to buy other products with high profit margins in addition to purchasing the loss leader product.

Question 3

Mark-up

Answer 3

Mark-up refers to the extra amount charged by a business on top of its unit costs of production in order to earn a positive profit margin. The mark-up can be expressed as an absolute amount (e.g. $10 per unit) or as a percentage of the cost (e.g. 75% per unit).

Question 4

Penetration pricing

Answer 4

Penetration pricing involves setting low prices in order to gain entry into a new market. Once the product or brand has established market share, prices can be raised.

Question 5

Predatory pricing

Answer 5

Predatory pricing involves temporarily setting prices so low that competitors, especially smaller businesses, cannot compete at a profitable level.

Question 6

Premium pricing

Answer 6

Premium pricing is when the price of a good or service is set significantly higher than similar competing products, usually because the product is of higher quality or is sufficiently unique to justify the premium price.

Question 7

Price wars

Answer 7

Price wars involve businesses competing by a series of continuous and/or intensive price cuts to threaten the competitiveness of rival firms in the market.

Question 8

Pricing methods

Answer 8

Pricing methods are the various methods of setting the amount that customers pay for certain goods and services.