Pricing Strategies

• What are the key factors influencing pricing decisions?

  Costs, product life cycle, nature of product, competition
• Why do costs influence a business's pricing decisions?

  Businesses aim to make a profit
• How do costs and price determine a business's profit?

  Price minus costs equals profit
• What is the consequence of setting a price lower than costs?

  Businesses cannot afford to operate
• What determines the pricing strategy during a product's life cycle?

  Where the product is in the life cycle
• Why might a business charge a higher price when launching a new product?

  To take advantage of exclusivity
• What was the price of the iPhone X at launch in Autumn 2017?

  $1,000
• How did the price of the iPhone X change by February 2018?

  The price fell to $850
• How does the nature of a product affect pricing?

  Luxury status and differentiation affect pricing
• What is the impact of a product being a luxury good on its price?

  It typically allows for higher pricing
• How does product differentiation influence pricing strategies?

  Similar products lead to similar pricing
• What is the pricing situation in the crude oil market?

  Uniform price for all businesses and customers
• How does the degree of competition affect pricing decisions?

  More competition leads to lower prices
• What is price skimming?

  A high initial price that lowers over time
• Why do businesses use price skimming?

  To maximize revenue before competition arrives
• How does price skimming help recover research and development costs?

  It allows for higher initial prices
• What is a disadvantage of price skimming?

  It can slow down product sales growth
• How does slower unit sales growth affect competition?

  Gives competitors more time to enter the market