price Flashcards
considerations when setting price
- nature of the market
- competitors
- public perception
- production cost
- profitability
- pricing strategy
price taker
A business has no option but to charge the ruling market price.
price maker
The business has a strong enough competitive position to be able to fix its own price
price leader
A price leader is often a market leader whose market share is so strong that its price changes are closely followed (and often copied) by rivals.
price follower
A business that just follows the price-changing lead of the market leader
cost plus pricing
The product costs £5 to produce, the business adds £5 margin to make the selling price £10
penetration pricing
- Low price at the start to gain access to the market.
- Often used when there are close competitors.
- Price is raised over time.
dynamic pricing
Prices will vary, low when demand is low, high when demand is high.
promotional pricing
- Vouchers/offers/discounts are used to encourage customers to buy.
- Used to quickly sell stock and aid cash flow.
skimming price
Setting a high initial price for the product when it is new or there are few competitors, then lowering it gradually over time.
psychological pricing
A price which makes the consumer think that a product costs a lot less
competitive pricing
Long term pricing strategy setting the price at the same level as competitors and rivals. The business will then compete on other factors such as convenience, customer services or after sales service.
premium pricing
Using a high price deliberately to signal luxury or quality/exclusive image.
loss leader
- Price of one item is set much lower than that of competitors.
- A loss is made on this product but brings customers into the shop to buy the products where they are then enticed to buy other full priced items
