*price

Question 1

what are the factors that affect a products price?

Answer 1

• how much production cost
• how much profit the business wishes to make
• what competitors are charging
• whether the product has a strong brand
• whether the product is perceived to be of a high quality
• the stage in the products life cycle

Question 2

low price

Answer 2

setting a price that is lower than competitors

e.g. if a competitor charges £4 the business might charge £3.99

Question 3

high/premium price

Answer 3

setting a price higher than most other similar products in order to create the image of quality

Question 4

competitive

Answer 4

setting prices in line with your competitor
(you cannot agree to charge the same - that’s illegal - but you can react to your competitor changing their price and make yours the same)

Question 5

cost plus profit

Answer 5

totalling up the cost of production for the product and adding on a fixed percentage to reach the selling price
(cost + profit = selling price)

Question 6

psychological

Answer 6

charging a price which makes the customer think the product/service is cheaper than it actually is
(e.g. charging £9.99 instead of £10)

Question 7

destroyer

Answer 7

setting prices artificially low for a short period of time in order to gain market share from competitors

competitors may be forced to lower their prices too or move out of the market

Question 8

price skimming

Answer 8

setting prices very high for a new/innovate product onto the market

prices will be lowered over a period of time as the product becomes less popular/out of date (e.g. games consoles are expensive when launched then decrease in price over a period of time)