Price

• Why is pricing a crucial decision for a business?

  It affects profit and customer attraction
• What are the risks of pricing too low?

  Not making enough profit
• What could happen if a business prices too high?

  It may struggle to attract customers
• What is the basic formula for pricing?

  Cost of production plus profit
• What are the five pricing strategies?

  • Penetration pricing
  • Skimming pricing
  • Competitive pricing
  • Cost Plus pricing
  • Premium pricing
• What is penetration pricing?

  Initial low prices to gain market share
• What is a drawback of penetration pricing?

  Attracts bargain hunters who switch
• What is market skimming?

  High initial prices that decrease over time
• What is a benefit of market skimming?

  Maximizes short-term profits
• What is competitive pricing?

  Setting prices based on competitors' prices
• What is a disadvantage of competitive pricing?

  Can lead to damaging price wars
• What is Cost Plus pricing?

  Adding a profit margin to production costs
• What is a limitation of Cost Plus pricing?

  Ignores market segmentation and perceptions
• What is premium pricing?

  Setting high prices for exclusive products
• What is a risk of premium pricing?

  May deter customers if quality is low
• What are the key points of each pricing strategy?

  • Penetration Pricing: Low initial prices to gain market share.
  • Skimming Pricing: High initial prices that decrease over time.
  • Competitive Pricing: Prices based on competitors' rates.
  • Cost Plus Pricing: Production costs plus profit margin.
  • Premium Pricing: High prices for exclusive, high-quality products.
• What is the goal of penetration pricing?

  To gain market share and profitability
• What does skimming pricing help recover?

  Development and marketing costs
• What is a common industry for competitive pricing?

  Petrol stations
• What does Cost Plus pricing ensure?

  Prices cover production costs
• What type of products commonly use premium pricing?

  Luxury products
• What is the main purpose of premium pricing?

  To position products as exclusive and high quality