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Higher Business Management > M Price > Flashcards

Flashcards in M Price Deck (12)
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1
Q

Factors to consider when setting a price

A
  • The quality of the product
  • The demand for the product
  • The costs of production
  • The brand selling the product
  • What competitors are pricing similar products
2
Q

Cost plus pricing

A
  • Takes into account how much the product costs to produce then adds a percentage of that onto the price to ensure a profit
  • Not very competitive
3
Q

Market skimming

A
  • A company charges a higher price for a new and innovative product to skim the market of those who are willing to pay more to get the product first
  • Once the novelty wears off, the product’s price will be reduced so the rest of the market will purchase it.
4
Q

Penetration pricing

A
  • When a company first entering the market charges lower prices than the rest of their competitors to gain customers and become more popular
  • One the product has gained a customer base, the price will be raised
5
Q

Discriminatory pricing

A
  • Selling the same product to different people at different prices
  • This ensures that sales are maximised and profits are maximised as they charge the most a certain group will pay for
  • Eg, holidaymakers charge higher during school holidays
  • Broadband providers charge new customers lower prices
6
Q

Destroyer pricing

A
  • Illegal practise

- When a company charges very low prices, sometimes even at a loss to push competitors out of the market.

7
Q

Loss leaders

A
  • Selling a product at a loss to entice consumers to buy other products that are more expensive
  • Eg, razors are sold a cheap price to force customers to buy the expensive razor heads, where the profit is actually made
8
Q

Promotional pricing

A
  • When a product is charged at a lower price for a specific amount of time to drum up attention and interest in the product.
  • Can be used to boost sales or introduce a new product
  • Eg 50% off
9
Q

Psychological pricing

A

-When a product is priced at a specific price such as £9.99 to make the consumer think they are paying less than what they actually are

10
Q

High (premium) price

A
  • When a product is priced at a very high price to reflect its quality and give an impression of luxury
  • Will attract customers who have high disposable incomes and want to buy luxury products
  • Very high profit margins
  • Will exclude consumers who can’t afford the product
11
Q

Low price

A
  • When product is sold at below market price to sell higher quantities and attract customers
  • Will attract customers who are looking for the cheapest product possible
  • May give the impression of a low quality product
12
Q

Competitive pricing

A
  • When the business prices their product very similarly to what their competition is pricing their’s
  • Allows the business to compete in other areas such as quality, promotion, customer services.