Marketing Pricing Strategies Flashcards Preview

Business Theme 1 MARKETING > Marketing Pricing Strategies > Flashcards

Flashcards in Marketing Pricing Strategies Deck (20)
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1
Q

What is price?

A
  • money charged for a product or service

- everything that a customer had to give up in order to acquire a product or service

2
Q

Financial objectives of price setting

A
  • maximise profit
  • achieve a target level of profits
  • achieve a target rate of return
  • maximise sales revenue
  • improve cash flow
3
Q

Marketing objectives of price setting

A
  • maintain/ improve market share
  • beat/ prevent competition
  • beat/ prevent competition
  • increase sales
  • build a brand
4
Q

Factors that influence a firms pricing strategy

A
  • competitors (charge at any price with less competitors)
  • USP (can charge more)
  • production costs
  • brand loyalty/ customer loyalty
  • elasticity of demand (charge more if inelastic)
  • profit margins
5
Q

Cost plus pricing

A

Involves adding a certain percentage to the average total cost of the product

6
Q

Price skimming

A

Means charging a very high initial price for the product

7
Q

Competitive pricing

A

Meaning charging about the same as, or a little less than, the prices of competing products

8
Q

Penetration pricing

A

Used to enter a new market. A lower price than the competition is set, to try and persuade customers of existing products to give the new product a try, in attempt to gain market share

9
Q

Psychological pricing

A

Used to make the price seem more attractive than it is actually by rounding it down

10
Q

Predatory pricing

A

Is a tactic used by a dominant business to reduce competition. Prices are set at a very low level, even below the costs of production. It is intended to drive competitors and new entrants out of the market.

11
Q

Cost plus pricing advantages and disadvantages

A

A- always leads to profit per unit

D- doesn’t consider outside environment- competitors could price themselves lower

12
Q

Price skimming advantages and disadvantages

A

A- initial high prices to help cover R&D costs, high prices help establish exclusivity and innovation

D- customers may be put off by high price, image/quality perception can be damaged once price drops occur

13
Q

Competitive pricing advantages and disadvantages

A

A- reduction in price can lead to sales uplift and increased number customers

D- competitors could price themselves lower

14
Q

Psychological pricing advantages and disadvantages

A

A- increased sales, don’t exceed price elastic consumer barriers

D- reduction in profit margin due to psychological gain

15
Q

Penetration advantages and disadvantages

A

A- quick gain in market share, low prices will attract customers- potential to gain brand loyalty

D- originally setting price low can impact perceived quality/ brand reputation, competitors may reduce prices making it difficult to justify increasing yours

16
Q

Predatory pricing advantages and disadvantages

A

A- drive competitors out of the market, more sales

D- illegal, short term loss

17
Q

Loss leaders advantages and disadvantages

A

A- gain increased sales and footfall

D- short term loss

18
Q

What is dynamic pricing?

A

Setting flexible prices for products or services based on current market demands

19
Q

Collusive behaviour

A

Two or more businesses discussing illegal market tactics for their benefit

20
Q

Social trends affecting pricing strategy

A

Online sales (e.g online travel agencies)

  • price changes frequently and quickly in response to changes in demand
  • dynamic pricing is made possible by technology that tracks demand and levels of interest

Price comparison websites (e.g go compare)
- customers are able to access comparative information due to having sites such as go compare