Marketing (price)

Question 1

Define price

Answer 1

The amount of money a customer has to pay to receive a good or service

Question 2

What are the 6 types of pricing strategies

Answer 2

Penetration, price skimming, cost plus, competitive, psychological and contribution

Question 3

What is penetration pricing

Answer 3

Setting a low initial price in order to get a foothold in the market and gain market share

Question 4

What market would penetration pricing be useful in

Answer 4

Mass markets

Question 5

What PED would a product have if penetration pricing is used

Answer 5

Price elastic

Question 6

What is price skimming

Answer 6

Setting a high initial price in order to recoup costs, they target to early adopters who desire the product instantly and will pay high prices, once these have been skimmed off the price will be lowered

Question 7

What is cost plus

Answer 7

When a percentage markup is added to the cost of producing a good or service to calculate its price, variable cost per unit + a proportion of total cost + percentage markup

Question 8

What is competitive pricing

Answer 8

Prices based on those charged by competitors, either the same or slightly lower, competition comes from other aspects of the marketing mix

Question 9

What is psychological pricing

Answer 9

Firms set a price for the product in order to entice the customer into making a purchase by making it sound cheaper than it actually is (£1.99)

Question 10

What is contribution

Answer 10

Prices are set to cover the variable costs of making a product and make a contribution towards fixed costs and eventually profit
C = selling price - variable costs

Question 11

How does the amount of USPs effect pricing strategy

Answer 11

The more differentiated a product is, the more they can charge for it, they may use price skimming

Question 12

How does price elasticity of demand effect pricing strategy

Answer 12

If the product is price elastic a business will keep prices in line with competition

Question 13

How does level of competition effect pricing strategy

Answer 13

If the market is competitive, competitive pricing will be used, large businesses may use predatory pricing to reduce competition

Question 14

How does the strength of brand effect pricing strategy

Answer 14

A strong brand adds value so firms can charge premium prices

Question 14

How does stage in product life cycle effect pricing strategy

Answer 14

When launching a firm may use skimming or penetration, this will change as the product ages

Question 15

How do costs and the need to make a profit effect pricing strategies

Answer 15

A business needs to set a price that covers costs to make a profit, this is cost plus