Price

• What is the objective of penetration pricing?

  To gain market share
• How does penetration pricing encourage purchases?

  By pricing products low to attract buyers
• What might a business do after gaining market share with penetration pricing?

  Raise the price gradually
• What is a potential benefit of penetration pricing?

  It can help establish brand loyalty
• What risk is associated with setting a price too low in penetration pricing?

  Customers may perceive the product as low quality
• When should penetration pricing be avoided?

  If the product life cycle is short
• What must businesses consider when using penetration pricing?

  Time to recover costs and grow market share
• What are the two broad groups of pricing strategies?

  Market-orientated and cost-based strategies
• What characterizes market-orientated strategies?

  Producing what the market wants
• What defines cost-based strategies?

  Focusing on internal costs for pricing
• What is price skimming also known as?

  Market skimming or creaming
• Why would a business use price skimming?

  To maximize revenue from a unique product
• What is a potential downside of price skimming?

  Competitors may quickly enter the market
• What is destroyer pricing?

  Setting a price low to eliminate competitors
• Why is destroyer pricing often considered illegal?

  It is seen as anti-competitive behavior
• What is going rate pricing?

  Accepting the current market pricing structure
• Who typically uses going rate pricing?

  Small businesses with limited pricing power
• What is loss leader pricing?

  Selling products at a loss to boost sales
• What is psychological pricing?

  Setting prices to match consumer expectations
• How does psychological pricing reinforce a company's image?

  By setting prices above competitors for perceived value
• What is contribution pricing?

  Pricing based on variable costs plus overheads
• What is cost plus pricing?

  Adding a profit percentage to production costs
• What is an advantage of cost plus pricing?

  Changes in costs can be passed to buyers
• What is a disadvantage of cost plus pricing?

  Competitors' actions may be ignored
• Why is choosing the right pricing strategy important?

  It can increase sales and profits
• What is a disadvantage of competitors following a pricing strategy?

  It may lead to no increase in sales
• What can happen if a pricing strategy does not attract customers?

  Sales may decline significantly
• What is a potential issue with expensive advertising for pricing strategies?

  It may reduce expected profits
• How can pricing strategies affect different market segments?

  Some segments may not accept the strategy