Price Flashcards
What is destroyer pricing?
-a pricing strategy to eliminate competition
-prices are set so low that competitors can not compete
-once all competitors are gone, the firm can raise prices again
What is the justification of destroyer pricing?
Competitions are forced to leave the market and therefore one firm dominates and can charge higher prices
What is penetration pricing?
-the firm will start off by offering a low price to lure customers in initially
-once the product becomes popular, the company will increase the price
what is the justification of penetration pricing?
-used to attract customers to new product
-encourages customers to buy the product and once customers are attracted, the price can be increased
What is loss leaders?
-the price charged is lower than the cost of making the product
-aim is to attract consumers into the shop where they will buy other full price products
What is the justification of loss leaders?
Product is made on the total amount of purchases the customer makes
What is price skimming?
-a company launch a new unique product and sell it at a high price
-it then lowers the price of the product over time when competition enters the market
What is the justification of price skimming?
A high price can be charged because little or no competition exists so a large profit can be made
What is psychological pricing?
-customers think the price is lower than it really is
What is the justification of psychological pricing?
It encourages customers to purchase and also those who buy on impulse
What is promotional pricing?
Prices are reduced for a short period to attract interest and boost sales
Often used to sell unwanted stock
What is the justification of promotional pricing?
The product will be bought by customers because it is on special offer and they are getting a ‘deal’
What is price discrimination?
-charging different prices for the same good or service at different times of the day or year
What is the justification of price discrimination?
Low demand means low price
High demand means high price
What is cost - plus pricing?
The cost of making a product is calculated and then a percentage of the profit is added on
