adding mark up of profit to the cost of producing product
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cusotmer based pricing
what firms belive cusotmers are willing topay
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competitor based pricing
competitors are main influence on the price set
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cost plus
adding a fixed amount / % to price of prodcuing the product
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how high should the mark up be (cost plus)
depends on the price of competitors
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advantage of cost plus pricing
business can predict profits and revenues due to mark ups
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penetration pricing
setting a low initial price ot attract customers
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advantages of penetration pricing
increases market share, supports launch of a product new into the market (where there is little product differentiation in themarket), encourages cusotmers to switch to the new prodcut due to lower prices
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price skimming
setting a high price before competitors enter the market
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when is price skimming generally used?
launch of a new product that faces little to no competiton and customers are prepared topay high prices
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disadvantage of price skimming
only works in the short term, decreases volume of growth and demand for the product and gives competitors a chance to take over
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define loss leaders
product priced below cost of production to attract customers into the shop (and they therefore purchase more products in total)
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advantages of loss leaders
helps drive customer loyalty
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risk of loss leaders
customers could buy in bulk because they find it cheaper and buy as much as they can because the good could b perishable (ie food from a supermarket), its v short term
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what is predatory pricing
undercut the competitors pricing and force them out of the market (ILLEGAL)
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what is psychological pricing
perceived price barriers that customers have (ie setting the product to 999 instead of 1000)
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what is going rate pricing
setting similar priced products to competitors
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advantages of going rate pricing
price isn't a competitive disadvantage
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disadvantage of going rate pricing
business needs a nonprime way of attracting customers (ie better customer service)
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Other cards in this set
Card 2
Front
what firms belive cusotmers are willing topay
Back
cusotmer based pricing
Card 3
Front
competitors are main influence on the price set
Back
Card 4
Front
adding a fixed amount / % to price of prodcuing the product
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