Theme 1 - 3.3 Pricing strategies

Question 1

What is competitive pricing ?

Answer 1

Pricing products similarly to competition.

Question 2

What is cost plus pricing ?

Answer 2

When the selling price for a product is determined by adding a fixed percentage to the unit cost ( A mark up)

Question 3

What is price skimming ?

Answer 3

When a product is priced highly recent to launch in order to maximise profit.

Question 4

What is penetration pricing ?

Answer 4

Pricing product low to begin with, and as repeat purchases occur, businesses will gradually increase their prices.

Question 5

What is psychological pricing ?

Answer 5

Pricing an item to make it seem cheaper (eg £1.99 instead of £2)

Question 6

What is the disadvantage to psychological pricing ?

Answer 6

Consumers may believe product is inferior or bad quality.

Question 7

What is promotional pricing ?

Answer 7

Reducing price for limited time to encourage consumers to purchase a product.

Question 8

What are the factors that determine the most appropriate pricing strategy ?

Answer 8

• Price elasticity of demand
• strength of brand image
• amount of competition (e.g many substitutes may mean elastic product).
• USP/differentiation (e.g homogeneous products require non pricing strategies)
• stage in product life cycle (e.g new product could price skim).
  -Cost of production
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