Session 17 - pricing strategies

Question 1

What are the 6 main pricing strategies

Answer 1

Cost-plus
Competitive
Skimming
Penetration
Predatory
Psychological

Question 2

What is cost plus pricing

Answer 2

The cost to produce the products are worked out then money is added on top

Question 3

What are the 2 ways to do cost plus pricing

Answer 3

Add a profit margin in £
Add a % percentage mark-up on top of the cost of making the product

Question 4

What is competitive pricing

Answer 4

Some products or services are priced in line with competitors

Question 5

What is a reason to use competitive pricing as the main strategy

Answer 5

customers will have to judge a product or service on “non-price” methods such as; quality of service or speed

Question 6

What is price skimming

Answer 6

A product is priced high to begin with as it has a desirability factor that will mean customers will want it when it is new

Question 7

What is price penetration

Answer 7

Setting prices low on a new product then raising prices gradually

Question 8

What does price penetration mean for market share

Answer 8

Low prices should gain the business more market share by trying to undercut competitors

Question 9

What is predatory pricing

Answer 9

When aggressive price cutting is used to deter competitors or push them out of the market

Question 10

What is psychological pricing

Answer 10

This means pricing a product at £199 rather than £200 to appear cheaper

Question 11

Factors that determine what pricing strategy to use

Answer 11

Strength of brand; stronger the brand the higher price can be charged. The stage in the product life cycle. Products in the saturation or decline phase may be priced lower to clear stocks before a new product is introduced. Costs. The need to make a profit