Edexcel-pricing strategies 1.3

Question 1

price

Answer 1

Money charged for a product or service.

Question 2

Mark up

Answer 2

Popular method of cost based pricing
Ratio between costs of goods and selling price
Expressed as percentage

Question 3

Adv of cost to influence pricing

Answer 3

Easy to calculate
Price increases justified when costs rise
Managers confident each product has profit

Question 4

Dis of cost to influence pricing

Answer 4

Ignores price elasticity demand
May not take account competition
Profits lost if price set below what customer wants

Question 5

Price skimming

Answer 5

set products to high prices

Question 6

Price skimming objective

Answer 6

Maximise profit to achieve recovery of costs

Question 7

Price penetration

Answer 7

Offer product at low inductory price

Question 8

price penetration aims

Answer 8

Gain market share so they can put product to a normal price
Build customer loyalty
Build sales of high priced items

Question 9

Predatory pricing

Answer 9

Dominant undertaking incurs losses with hopes of removing potential competitors

Question 10

Price wars/ competitive pricing

Answer 10

Competitive price reduction by firms in competitive industry

Question 11

Psychological pricing

Answer 11

change prices to end 99p so perceived as cheaper

Question 12

Loss leader

Answer 12

A product predominantly displayed and advertised as below normal price and cost to seller.

Question 13

Loss leader aims

Answer 13

Encourage people to buy complementary goods at full price

Question 14

Dynamic marketing

Answer 14

Pricing strategy where businesses set flexible prices for products or services based on current market demands.

Question 15

Dynamic marketing eg

Answer 15

Taxis
Holidays

Question 16

predatory pricing aims

Answer 16

Seek to increase market share
Good for customers short term but long term all competitors removed

Question 17

price wars/ competitive pricing effect

Answer 17

may seem good to consumers in short run but is harmful if all competitors are removed

Question 18

Premium pricing

Answer 18

When goods are sold at high prices
Tend to have ups to sell at these prices.

Question 19

Benefits of dynamic marketing

Answer 19

Maximise profits
Get rid of unsold stock
Treats customers more individually

Question 20

Online sales

Answer 20

Businesses sell products and services online.

Question 21

Online sales advantages

Answer 21

Convenience as accessible 24/7
Reach new markets

Question 22

Online sales disadvantages

Answer 22

Lots of competition
Can be complicated

Question 23

Price comparison sites

Answer 23

Used to compare products based on price, features and reviews.

Question 24

Price comparison sites advantages

Answer 24

Keep up to date with prices
Find out what different competitors are selling

Question 25

Price comparison sites disadvantages

Answer 25

Loose consumers if they are not the cheapest business. Other competitors can find out all their information

Question 26

Cost plus

Answer 26

cost + profit wanted to be made

Question 27

Factors to consider when choosing a price strategy

Answer 27

Number of USPS Level of competition PED

Question 28

Number of USPS

Answer 28

Can demand higher prices if lots of unique selling points.

Question 29

Level of competition

Answer 29

Highly competitive markets may need low prices whereas less competitive markets can charge higher prices.

Question 30

PED

Answer 30

Businesses should set lower prices if product is elastic. Businesses should set high prices if products price inelastic.

Question 31

Markup

Answer 31

gross profit/ cost of goods sold x 100