pricing strategies

Question 1

price skimming

Answer 1

new and innovative products sold at high prices and then reducing it a year or so later
consumers will pay more as product has value
high price boosts the products image
when price is taken down, the consumers who wanted that first new product will have already brought it

Question 2

adv of price skimming

Answer 2

long term strategy
people that are wanting to get first new thing, will at the higher cost

Question 3

dis of price skimming

Answer 3

customers can be put off inital high price

initial buyers may be frustrated that they paid much higher price then consumers are now for same product

Question 4

penetration pricing

Answer 4

initial price is low to attract customers and gain market share
and then slowly increases
effective in markets where producsts are price senstive e.g washing powder

Question 5

dis of penetration pricing

Answer 5

customers may expect low price to continue
difficult to raise it without losig customers

Question 6

cost plus pricing

Answer 6

find out percenatge of how much it cost to make the product
this then added onto the price it charges the product for

Question 7

predatory pricing

Answer 7

where business deliberatly lowers their prices to force another business out of market
once cocmpetioro has left, they will rise prices back up again
illegal under EU and US laws

Question 8

competitive pricing

Answer 8

where a business monitors their compeitiors prices making sure thier prcies set are below or equal too their compeitors prices
often takes place in supermarkets

Question 9

psychological pricing

Answer 9

high price associated with high quality
low price associated with low quality
setting prices at 4.99 seems a lot better than 5 pound even tho its a 1 pence deifference

Question 10

impact of social trends on business pricing strategies

Answer 10

lot of businesses beomign online retailers
ned to be more price compeitive, as consumers can easily shop around and find cheaper prices
if many substitutes of a similar quality product, then cheapest online retailer will win the sale

customer may be influenced by other factors e.g free delivery, free return
therefore, making them pay a higher initial cost for the product

Question 11

price comparison sites

Answer 11

e.g flights
making it much easier for custoers to compare prices and find the best deal
popular as save time and effort for customers to find the lowest price

retialers need effective info systems so can always be aware of prices charged by compeitors, so tehy can be price senstive