Price

• What is the marketing mix component discussed in the material?

  Price
• How does an increase in price typically affect demand?

  It usually leads to a decrease in demand
• What is price penetration?

  Starting with a low price and increasing it
• What is cost-plus pricing?

  Calculating cost and adding a percentage
• What is price skimming?

  Starting with a high price and reducing it
• What is a loss leader strategy?

  Selling a product at a loss to attract customers
• What is psychological pricing?

  Setting prices lower than whole numbers
• What factors influence pricing decisions?

  Cost, demand, competition, product life cycle, brand image
• How does demand affect pricing?

  Low demand may require lower prices
• How does competition influence pricing?

  May require price reductions to compete
• How does the product life cycle affect pricing?

  Prices may change depending on the stage
• How can brand image affect pricing?

  Higher prices can result from a desirable brand
• What is the formula for cost-plus pricing?

  PRICE = unit cost + (markup x unit cost)
• If the unit cost to manufacture a wakeboard is $120 and the markup is $50\%$, what is the selling price?


  $180
• What risk is associated with setting a high markup?

  The price may become uncompetitive
• What happens if a business fails to attract new customers?

  There could be a reduced margin
• What is the consequence of setting prices too high compared to rivals?

  It may lead to uncompetitive pricing
• what is price discrimination?

  Charging different prices for the same product or service based on different customer characteristics or willingness to pay.
• benefits & drawbacks of price skimming

  benefits:

  • potential for high profits straight away - can help to pay back its research and development costs
  • product may get a reputation for quality, encouraging brand loyalty

  drawbacks:

  • cannot last long, as competitors soon launch rival products which puts pressure on the price
  • may slow down the growt in sales of product because its more expensive
• benefits and drawbacks of price penetration

  benefits:

  • builds customer loyalty
  • can help develop long-term profitability of having higher sales and a higher market share

  drawbacks:

  • short term likely to result in lower profits
  • may be difficult to raise the selling price in the future
• benefits and drawbacks of comnpetitve pricing:

  benefits:

  • selling price should be in line with rivals - so price should be competitive to attratc customers

  drawbacks:

  • the business will need to research what its competitors are charging which could increase costs and lower profits
• benefits and drawbacks of loss leader

  benefits:

  • high volume purchases - by reducing the price of one or more products to below market avergae, brands entice customers to pay more

  drawbacks:

  • risk in making a loss - if business doesn't attract new customers then there could be a reduced margin