Price Flashcards
All 13 cards in this deck
What is a volume pricing strategy?
Setting a low price with a low profit margin on each item, so the business relies on selling a high volume to make a profit.
What is a margin pricing strategy?
Setting a high price with a high profit margin on each item, accepting that the business will sell a low volume.
What is competitive pricing?
Setting a price in line with, or just below, the prices charged by competitors.
What is premium pricing?
Setting a price higher than competitors' to show that the product is high quality or exclusive.
Why might a business set a low price when it launches a product?
To encourage customers to try the product, so it builds sales and customers may keep buying it later.
Give two influences on a business's pricing strategy.
Any two of: technology, competition, market segments, the product life cycle.
How can competition influence a business's choice of pricing strategy?
In a market with lots of competition the business may need to use competitive pricing, so its products appear good value against rivals.
How can the product life cycle influence the price charged?
Prices are often cut in the maturity or decline phase, as an extension strategy to keep sales up.
How can technology influence a business's pricing?
Price comparison sites and online shopping let customers compare prices instantly, so businesses must keep prices competitive.
True or false? Lowering the price always increases a business's profits.
False. The profit margin on each item falls, so profit only rises if enough extra units are sold.
What kind of business is suited to a volume pricing strategy?
One that can keep its cost per unit very low and has the capacity to produce and deliver on a large scale, so a thin margin on each item still adds up to a profit.
How can market segments influence a business's pricing?
Different groups of customers may be charged different prices, e.g. a discount for students or a higher price for a premium version.
How can new technology in production influence the price a business charges?
Technology such as automation can lower the cost of making each item, so the business can charge less than rivals and still keep its profit margin.