PRICE

• What are 'early adopters'?

  customers who are keen to buy new products as soon as they are launched
• Why is price important?

  it is important to get the price right or people will go and buy goods or services elsewhere
• What are the factors that affect price?

  • marketing mix
  • objectives
  • taxes
  • competition
  • consumers perceptions
  • costs
• How does marketing mix affect price?

  Price has to fit in with other elements in the mix
• How do objectives affect price?

  pricing can be used to achieve certain aims
• How do taxes affect price?

  Many goods have taxes on them. Such as tobacco and petrol
• How does competition affect price?

  Prices are often influenced by those charged by rivals. If there is a lot of competition, a firm will have less control over price
• How do customers perceptions affect price?

  customers want value for money so prices must reflect this
• How do costs affect price?

  costs have to be covered so that profit is made. As costs rise, prices will rise
• Why might a business use the penetration pricing strategy?

  • it is hoped that consumers get into the habit of buying the product when the price is low. Then while the price rises, people continue to buy it
  • large retailers and bulk buyers are more likely to show interest in a product if it is generously priced. This will help a business sell larger quantities of the new product and get established in the market
• What is cost-plus/ cost-based pricing?

  adding a percentage (the mark up) to the cost of producing a product to get the price
• What is mark-up?

  a percentage added to the costs that makes a profit for a business when setting the price
• What is penetration pricing?

  setting a low price to start with in order to get established in the market; price may be raised once established
• What is competition-based pricing?

  pricing strategies based on the prices charged by rivals
• What is destroyer or predatory pricing?

  pricing setting a low price until rivals have gone out of business
• What is skimming?

  setting a high price initially and then lowering it later
• Why might prices be cut for promotional pricing?

  • to get rid of old stock
  • to generate cash quickly to solve a cash flow problem
  • to generate renewed interest in an existing product
  • to attempt to win a larger share of the market by encouraging brand switching
• What is promotional pricing?

  lowering the price of a product for a short time to draw in customers
• What are the different approaches to promotional pricing?

  • discounts and sales
  • psychological pricing
  • loss leaders
• what are discounts and sales?

  having sales where goods are sold below the standard price.

  e.g. black Friday
• What is psychological pricing?

  Setting the price slightly below a round figure. e.g. £9.99 instead of £10
• What is loss leaders?

  products sold below cost to draw in customers
• What is the pricing strategy that involves setting a very high price initally when a new product is launched?

  Skimming
• What pricing strategy involves adding a mark-upto the costs of the product?

  cost-plus
• Which might affect the price charged by the business?

  competition
• Which is an example of promotional pricing?

  loss leaders