Chapter 55, Price Flashcards Preview

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Flashcards in Chapter 55, Price Deck (17):
1

Forces affecting price

- objectives if the business
- consumers, income, and tastes
- cost of producing the good
- level of demand
- level of competition
- actual nature of the product
- it's stage in the product lifecycle
- rest of the marketing mix
- the scale of production
- the economic environment
- value of the pound
- legislation
- weather conditions

2

Price elasticity of demand

the response of demand to changes in price
Percentage change in demand / percentage change in price

3

Income elasticity of demand

the response in demand to a change in income
Percentage change in demand / Percentage change in income

4

Cross elasticity of demand

shows how the change in the price of one good will affect the demand for another ( CD, CD Player)
Percentage change in the demand for A / Percentage change in the price of B

5

Pricing Strategies and Methods

- Skimming
- Penetration Pricing
- Premium Pricing or prestige Pricing
- Psychological pricing
- Loss leaders
- Competition-based pricing
- Predatory pricing
- Market-based Pricing
- Promotional pricing
- Cost Plus
- Contribution or marginal cost Pricing
- Price discrimination

6

Skimming

setting high prices in order to gain profit quickly from products with a short product lifecycle

7

Penetration Pricing

used to establish a new product in the market by setting initially low prices in comparison to competitors in order to gain consumers and market share quickly.
often heavily advertised.

8

Premium Pricing or Prestige Pricing

a high price is set to create an image of prestige and high quality

9

Psychological pricing

£9.99

10

Loss `leaders

used to entice customers into a particular shop often used by supermarkets with essential products like milk having low prices in order for consumers to make other purchases in the store

11

Competition-based Pricing

Setting lower prices than competitors in order to better them and gain market share

12

Predatory Pricing

where an established business responds to a new entrant by reducing its prices making it impossible for the new entrant to gain market share

13

Market-based pricing

the going rate

14

Promotional Pricing

offers such as By 1 get 1 free

15

Cost Plus

pricing the product above costs of production

16

Contribution or marginal cost pricing

fixed costs are ignored and only variable costs are taken into account. The contribution is the selling price of a product minus the variable cost of producing it. ensuring the price gives a positive contribution

17

Price discrimination

Price changes depending on what area of the world it's in and what time it is or season