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level: Pricing Methods [Revise]

Questions and Answers List

level questions: Pricing Methods [Revise]

QuestionAnswer
What is the Price [Marketing Mix]-Money charged for a Good/Service -The amount that needs to be given to gain access to the Product -Usually given in Pounds [United Kingdom]
Why is the Price so Important?-Affects Revenue Directly -Has to make sense with the Other Elements, otherwise the Perception of the Customer will challenge it -Making a bad choice can lead to a Decrease in Sales and Cash Flow
What can Influence the Price?-Costs to Make -What Stage the Product is in [Product Life Cycle] -Market Share -Marketing Objectives -Positioning -Competitors
What are the Types of Pricing Methods?-Competitor -Penetration -Promotional -Cost-Plus -Skimming
What is Price Skimming?-Setting a high price before any other Competitors come in -Usually reserved for the Launch of a Product which hasn't got much Competitions because of the Product Possessing -Customers buy this, to gain Access to the Latest or Best product in the Market
Advantages of Price Skimming-Has the reach of High Profits instantly. This can pay up the Research Costs and Development Costs -Can have a Reputation for Quality, Encouraging Brand Loyalty -Profits made can be used for the Next New Product
Dis-Advantages of Price Skimming-Short Lifespan as Competitors will also too launch Products that pressure yours -Can slow down the Growth of the Product; its Expensive and no more Customers can't/won't pay for it
What is Price Penetration-Offering Low prices on Goods and Services -Used by New Businesses to Launch New Products; draws Consumers away from Competitors -Can however be a loss of Profits short term; long term can see the Exposure making Profits
Advantages of Price Penetration-Strengthens the Usage and Loyalty -Develops long term Profitability of Higher Sales and a Higher Market Share
Dis-advantages of Price Penetration-Short term, will be Low Profits. -Can be Difficult to Raise the Selling Price in the Future
What is Cost Plus?-Adding a % of the cost of making the Product, or Buying the Product -Overtime, the Price must relate even more of the Costs, to make a Product -A popular methods of Cost-Basing is Mark up
How high should that Mark Up Percentage be? [Pricing Methods]-Varies on the Competition and the Price Results in Sales to Customers -Example; Birthday Card for 60p. Usually its 100% so the total price would be $1.20 [pounds]
Advantages and Disadvantages of Cost PlusGood; -Guaranteed Profit on a Sale Bad; -If set too high, it could be to expensive rather then the Competitors Price.
Competitor Pricing, what is it?-Looks into what the Competitors Charge; giving an idea to what price to set -Used when a-lot of Competition is present and when there are Many Places to Buy off -Customers may buy the Cheapest ones, but some others may have a Reasonable Price set in their Heads -If little Competitions, don't bother with this
Advantages of Competitor Pricing-Prices Lines up with Rivals, making it Attractive to Customers
Dis-advantages of Competitor Pricing-Businesses can not rely on Prices to Attract Customers. It could use Better Quality. Customer Service or Availability. -Businesses need to Research on the amount that's being charged; increase Costs and lower Profits
What is Promotional Pricing-Short term Pricing method -This is a Reduction of Price, attracting customers to buy -Used when Sales have Declined -Used to sell of Old Stock
Advantages of Promotional Pricing-Sales Volume increases, improving the Cash Flow and Market Share -Can encourage Customers to Trail a Product, who may become loyal later as the Price Increases
Dis-advantages of Promotional Pricing-Customers may only buy off you if its Discounted -Brand Image may be Tarnished by a lot of Promotions.
What are Loss Leaders?-Prices that are Set low on Purpose to attract Customers who will buy that. and maybe others Profitable Products -However chances are they won't leading to a Decrease in Profits