Pricing

Question 1

Meaning of price skimming

Answer 1

When a new product enters the market the business
May set a high price and slowly begin to lower it
Over time.

Attracts ‘premium’ customers

Question 2

Meaning of penetrating pricing

Answer 2

Price penetration is a strategy when the business when releasing a
Product sets the starting price** lower.** The** lower**
Asking price allows the new product to penetrate
The market

Often used with ‘habit forming goods’ E.G
Internet provider
Toilet paper

As soon as the price goes to high customers may go
To substitutes

Question 3

Meaning of Price leadership

Answer 3

When a company instead of looking at the price
Other companies have set, set their own price

This is where the dominant firm sets the price
And others follow.

Price wars may occur if too many firms try to
Exercise price leadership

Question 4

Meaning of price taking

Answer 4

A price taker is an individual or company
That must accept the prices set by other
Companies
Even though sometimes the companies costs
Are higher

They compete through promotion

Question 5

Meaning of Predetory pricing

Answer 5

Larger firms will deliberately undercut
Smaller firms to prevent them from establishing Themselves in the market

Once the competition is removed, prices can then be raised

Question 6

Meaning of cost- plus Pricing

Answer 6

Cost+ Pricing- pricing is where the company determine their costs and their revenue to see where they should price an item

Question 7

Meaning of Phycological Pricing

Answer 7

here are certain price points which represent barriers to consumers
£ 5 or £ 4.99

Bundling-
Grouping products together so that customers think they have a bargain

Add on fees-
Keeping the headline price below the psychological price points, but charging extra for unavoidable