business test 4.5

Question 1

what is branding

Answer 1

Used to give a product a name or identity. A good brand leads to a good brand reputation, and helps gain good competition

Question 2

4 aspect of branding

Answer 2

1) brand awareness
2) brand development
3) brand loyalty
4) brand value

Question 3

brand awareness

Answer 3

knowledge and awareness of a familiar brand can lead to increased sales. how well your customers know the business

Question 4

brand development

Answer 4

communicating value of a brand and what the brand stands for making more people attracted to the brand

Question 5

brand loyalty

Answer 5

customers repeatedly buy the same brand, they won’t switch to a rivalry brand

Question 6

benefits of brand loyalty

Answer 6

trust, ability to charge more, repeat customers, lower chance of brand switching, higher brand value

Question 7

brand value

Answer 7

expected earning potential of a brand, how much the brand is worth, intangible fixed asset

Question 8

cost plus (mark-up) pricing

Answer 8

adds profit margin to the costs of production in order to determine the selling price of a good or service (selling price is higher then the production costs)

Question 9

advantages of cost plus pricing

Answer 9

• simple to understand and calculate
• suitable for most goods and services
• selling price is above total cost of production

Question 10

disadvantages of cost plus pricing

Answer 10

• ignores prices being charged by competitors
• does not consider the needs of customers

Question 11

penetration pricing

Answer 11

setting a low price in order to enter an industry, allows firms to compete against existing firms and gain market share

Question 12

advantages of penetration pricing

Answer 12

• helps brand enter a new market
• can discourage other businesses from entering an industry
• lower prices usually lead to gaining market share and high sales

Question 13

disadvantages of penetration pricing

Answer 13

• not long term
• if the costs of product rises the price may not be suitable
• can make the customers think the product is cheap or bad quality

Question 14

loss leader pricing

Answer 14

pricing a product below its cost of production to attract customers to also buy other items at the same time

Question 15

advantages of loss leader pricing

Answer 15

• help attract customers
• business can benefit from higher sales revenue
• brand switching strategy

Question 16

disadvantages of loss leader pricing

Answer 16

• deemed to be unethical
• must have enough inventory to meet demand

Question 17

predatory pricing

Answer 17

charging a low price sometimes even below the cost, so as to damage the sales of rivals, limits competition

Question 18

advantages of predatory pricing

Answer 18

• low prices tempt customers to buy more
• barrier to entry

Question 19

disadvantages of predatory pricing

Answer 19

• may violate laws in certain countries
• can make customers question the quality of product
• competitors will likely reduce their prices leading to price war

Question 20

premium pricing

Answer 20

permanently setting a high price for its products because of the associated image, reputation or status associated with its high quality products (Gucci)

Question 21

advantages of premium pricing

Answer 21

• exclusive high quality products
• high profit margins
• helps establish good brand reputation

Question 22

disadvantages of premium pricing

Answer 22

• limit the number of potential customers because of high price

Question 23

dynamic pricing

Answer 23

strives to determine the optimum price at different periods of time

Question 24

advantages of dynamic pricing

Answer 24

increase sales revenue by capturing the willingness of customers to pay more during peak periods

Question 25

disadvantages of dynamic pricing

Answer 25

- consumers who are charged higher prices may feel ripped off - time consuming for customers to have to spend time finding the best deals/prices

Question 26

competitive pricing

Answer 26

- competition based pricing - businesses set their prices based off of what their rivals are charging - simplest pricing methods available to businesses

Question 27

advantages of competitive pricing

Answer 27

- low risk - helps to ensure prices aren't too high or too low - flexibility

Question 28

disadvantages of competitive pricing

Answer 28

- difficult to stand out in a highly competitive market - time consuming and expensive

Question 29

contribution pricing

Answer 29

setting the price greater then the per unit variable costs of production, only takes into account one variable (cost)

Question 30

advantages of contribution pricing

Answer 30

- easy calculation - useful for when deciding on the price to charge customers for a special or additional order

Question 31

disadvantages of contribution pricing

Answer 31

- assume that selling price is constant - can be difficult to give fixed costs across product mix, therefore inaccurate prices being set

Question 32

price elasticity of demand - theory

Answer 32

measures the extent to which the demand for a product changes due to a change in its price

Question 33

price inelasticity

Answer 33

when the change in price has little effect on the demand