2.4 the marketing mix- price Flashcards
what factors must a business consider when setting prices?
•how much the product costs to produce
•the profits the business hopes to make
•the price competitors are charging
•a business may need to charge a low price to entice customers to try their product
what are the five pricing strategies?
•price skimming
•cost plus
•penetration
•competitor
•promotional
what is competitor pricing?
*looking at the price being charged by competitors
-allows the business to remian competitive to the competition
-the profits of the business will decrease for a period of time whle this compettion pricing takes place
what is cost-plus pricing?
*looking at the business’ costs before deciding what price to charge
*businesses will look at the cost to make a product snd add the profit they wish to make
-the busines will make profit on evry product sold
-there is no guarantee the products will sell
what is penetration pricing?
*reducing prices in order to entice customers to your business
*once the business has established it’s name the businesses can put prices up again
-the company would hope that customers will be attracted to purchase the product/ serivce due to its quality tase etc. and continue to purcase once prices increse
-only last for limited time as the business needs to increase prices once profit is made
what is skimming?
*when a business introduces a new product that is clearly superior to that of it’s competitor so they can sell it at a higher price
-may indicate to cutomers that the product is higher quality
-only lats when ther is no competition from other companies
what is promotional pricing?
*reduction in price used to either attract customers to an existing product or to sell off old stock
-by offering penetration the busines would be able to ensure excess stock would be sold e.g. out of season christmas stock
-a disadvantage is that it can only be used for limited time
