1.3.3 Pricing Strategies

    Cards (43)

    • What are pricing strategies used for?
      To set prices
    • Penetration pricing involves setting a low initial price to enter a market
    • Skimming involves setting a high price to maximise profits.
    • What is competitive pricing based on?
      Competitors' prices
    • Cost-plus pricing involves adding a markup to the cost of production
    • Match the pricing strategy with its description:
      Penetration Pricing ↔️ Low initial price
      Skimming ↔️ High price for profit
      Competitive Pricing ↔️ Based on competitors
      Cost-plus Pricing ↔️ Markup on production cost
    • What is the primary goal of cost-based pricing methods?
      Cover expenses and profit
    • Cost-plus pricing adds a markup to the total production cost
    • Break-even pricing aims to generate a specific profit level.
      False
    • What is the formula for target profit pricing?
      Total Cost + Target ProfitNumber of Units Sold\frac{\text{Total Cost + Target Profit}}{\text{Number of Units Sold}}
    • Pricing methods are part of the marketing mix.
    • What does cost-plus pricing involve adding to the total production cost?
      A markup
    • Target profit pricing aims to achieve a specific profit level
    • Match the pricing method with its description:
      Cost-plus ↔️ Adds a markup to total cost
      Break-even ↔️ Covers costs without profit
      Target profit ↔️ Aims for a specific profit
    • What is penetration pricing designed to achieve when entering the market?
      Low initial price
    • Skimming involves setting a high initial price
    • What is competitive pricing aligned with?
      Competitors' rates
    • Pricing strategies are part of the overall marketing mix.
    • The break-even price formula includes fixed costs and variable costs divided by the number of units sold
    • In cost-plus pricing, the markup is added to the total cost
    • Market-based pricing methods focus on production costs.
      False
    • Match the market-based pricing method with its example:
      Competitive pricing ↔️ £1.50 per litre of milk
      Premium pricing ↔️ £1000 for a new smartphone
      Value pricing ↔️ Subscription at £25/month
    • Cost-based pricing ensures maximum revenue in a competitive market.
      False
    • Order the steps in the process of using market-based pricing:
      1️⃣ Analyze market conditions
      2️⃣ Assess customer perception
      3️⃣ Choose a pricing strategy
      4️⃣ Set the price
    • Market-based pricing determines prices based on market conditions and customer perception
    • Premium pricing involves setting high prices for perceived value
    • Value pricing balances cost and benefits to attract customers.
    • Match the pricing approach with its basis for price determination:
      Cost-Based Pricing ↔️ Production costs
      Market-Based Pricing ↔️ Market conditions and customer perception
    • Competitive pricing is a method used in market-based pricing.
    • What is the selling price of a table if it costs £150 to produce and has a 30% markup?
      £195
    • Penetration pricing involves setting a low initial price to attract customers.
    • What is a drawback of penetration pricing?
      Lower profit margins
    • Match the cost-based pricing method with its example:
      Cost-Plus Pricing ↔️ Furniture with 30% markup
      Break-Even Pricing ↔️ Printer selling books at £20
      Target Profit Pricing ↔️ Bakery aiming for £5,000 profit
    • Break-even pricing sets prices to cover all costs without generating a profit.
    • Cost-based pricing methods may not reflect market demand.
    • What is the break-even price if fixed costs are £10,000, variable costs are £10 per unit, and 1,000 units are sold?
      £20
    • Market-based pricing methods rely on market conditions and customer perceptions.
    • What is the primary goal of competitive pricing in market-based pricing?
      Retain market share
    • Match the market-based pricing method with its example:
      Competitive Pricing ↔️ Milk priced at £1.50 per litre
      Premium Pricing ↔️ Smartphone priced at £1000
      Value Pricing ↔️ Monthly subscription for £25
    • Cost-based pricing sets prices based on production costs.