3.3.2 Price Flashcards

1
Q

What are the different types of pricing?

A
price skimming
penetration pricing
competitive pricing
cost-plus pricing
promotional pricing
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2
Q

What is ‘price skimming’?

A

Setting a high price for a new product that is unique or very different from any other product on the market

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3
Q

Advantages + disadvantages of price skimming

A

ads:
Profit earned is very high
Helps to recover research and development costs

disads:
Laws may have been placed to stop this
Backfire if competitors produce similar products at a lower price

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4
Q

What is ‘penetration pricing’?

A

Setting a low price to attract customers to buy a new product

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5
Q

Advantages + disadvantages of penetration pricing

A

ads:
Attracts customers more quickly
Can increase market share quickly

disads:
Cannot recover development costs quickly
Possible loss of revenue due to lower prices

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6
Q

What is ‘competitive pricing’?

A

Setting a price similar to that of competitor’s products which are already established in the market

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7
Q

Advantages + disadvantages of ‘competitive pricing’?

A

ads:
Business can compete on other things e.g. service

disads:
Still need to find ways of competing in order to attract sales

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8
Q

What is ‘cost-plus pricing’?

A

Setting price by adding a fixed amount to the cost of making or buying the product

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9
Q

Advantages + disadvantages of ‘cost-plus pricing’?

A

ads:
Quick + easy to work out price
Makes sure that price covers all costs

disads:
Price might be set higher than competitors/ more than customers are willing to pay, → reduces sales and profits

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10
Q

What is ‘promotional pricing’?

A

Setting price of a small number of products at below cost to attract customers into outlet in hope that they will buy other products priced to earn a profit

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11
Q

What is ‘price elasticity of demand’?

A

Measures by how much demand for a product changes when there is a change in price

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12
Q

What is ‘price inelastic demand’?

A

The percentage change demand is less than the percentage change in price. Products that are not very responsive to changes in price

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13
Q

What is ‘price elastic demand’?

A

The percentage change demand is greater than the percentage change in price. Products that are more responsive to changes in price

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