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Business Studies > Price > Flashcards

Flashcards in Price Deck (28):
1

Why do you need to research on price?

- need to know the prices of competitors
- need to know what the retailers sold - product line
- need to know what customers would buy for good value for money

2

What is psychological pricing?

Psychological pricing is thinking something is cheaper than it actually is/thinking you're saving money.

3

What is pricing?

Pricing is deciding what price to set for products or services.

4

What is price

Price is what the buying it prepared to pay in exchange for a product or service.

5

Give an example of a fee:

Car parking

6

Give an example of a fare:

Bus

7

Give an example of a rent:

Property

8

Give an example of subscription:

Netflix

9

How do businesses set their prices?

- competition
- cost of product
- what the customer is willing to pay

10

What are pricing strategy?

Pricing strategy is how to set the price.

11

What is cost-plus pricing?

Total cost of producing a product by adding together fixed and variable costs.

12

What is competition pricing?

Setting the price for a product based on the price charged by their competitors.

13

What is penetration pricing?

Setting a low price for a product to persuade customers to buy it.

14

What is skimming/creaming pricing?

The high price for a unique product when it is first introduced.

15

What is a lost leader?

Selling a product for less than what it costs to produce.

16

What is promotional pricing?

Reducing the price of a recognised product for a certain amount of time to interest customers into buying it.

17

What are the advantages of cost-plus pricing?

- can be flexible around the objectives of the business
- its quick and simple of calculate
- it ensures that the retailer covers the cost of buying the product from the manufacturer and makes a profit

18

What are the disadvantages of cost-plus pricing?

- if the percentage is too low it may mean a lost opportunity to make a profit
- if the percentage is too high, it will reduce sales

19

What are the advantages of competition pricing?

- it's a safe strategy because it avoids price competition which can be damaging to a business.
- prices will be competitive

20

What are the disadvantages of competition pricing?

- businesses have to find other ways of attracting customers
- the competitive price may only just cover the cost of the product

21

What are the advantages of penetration pricing?

- achieve a sudden spurt in the market share
- low prices are set so the business can break into the market

22

What are the disadvantages of penetration pricing?

- pricing may be too low so they could lose sales
- it doesn't help to recover research and development costs

23

What are the advantages of skimming/creaming?

- maximise value added or profit margins
- establish a prestigious brand name

24

What are the disadvantages of skimming/creaming?

- the price set could be too high meaning people won't buy the product
- have to be sure you have an innovative idea that you can sell easily

25

What are the advantages of a loss leader?

- customers may buy other products from which a great product is found

26

What are the disadvantages of a loss leader?

- customers may not buy the accessories along with the product

27

What are the advantages of promotional pricing?

- it can help to renew customers interest in products with falling sales
- it earns revenue on goods which are no longer popular

28

What are the disadvantages of promotional pricing?

- sales revenue will be lower
- when used to renew interest in a product it can be very risky venture if sales do not rise