Flashcards in Price Deck (28):
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
What is psychological pricing?
Psychological pricing is thinking something is cheaper than it actually is/thinking you're saving money.
What is pricing?
Pricing is deciding what price to set for products or services.
What is price
Price is what the buying it prepared to pay in exchange for a product or service.
Give an example of a fee:
Give an example of a fare:
Give an example of a rent:
Give an example of subscription:
How do businesses set their prices?
- cost of product
- what the customer is willing to pay
What are pricing strategy?
Pricing strategy is how to set the price.
What is cost-plus pricing?
Total cost of producing a product by adding together fixed and variable costs.
What is competition pricing?
Setting the price for a product based on the price charged by their competitors.
What is penetration pricing?
Setting a low price for a product to persuade customers to buy it.
What is skimming/creaming pricing?
The high price for a unique product when it is first introduced.
What is a lost leader?
Selling a product for less than what it costs to produce.
What is promotional pricing?
Reducing the price of a recognised product for a certain amount of time to interest customers into buying it.
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
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
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
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
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
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
What are the advantages of skimming/creaming?
- maximise value added or profit margins
- establish a prestigious brand name
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
What are the advantages of a loss leader?
- customers may buy other products from which a great product is found
What are the disadvantages of a loss leader?
- customers may not buy the accessories along with the product
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