Pricing strategies and evaluation

Rory Coverdale
Flashcards by Rory Coverdale, updated more than 1 year ago
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Year 12 Economics and Business Flashcards on Pricing strategies and evaluation , created by Rory Coverdale on 03/13/2017.

Resource summary

Question Answer
Price points All products are sold at certain predetermined prices.
Advantage of Price points It is simple for customers to choose, and is easy for businesses to set prices and to suggest that customers consider a higher priced model. (However, the profit margin on each product varies)
Price skimming A business starts out with a high price in the introduction stage so that those who want a product will buy it, then they lower it to attract more customers.
Advantage of price skimming It will lead to higher profits for the business
Price penetration A business starts out with the lowest possible price in the establishment stage to attract customers, then raises its price once established.
Advantage of price penetration The business will get more revenue as the customers hopefully will have enjoyed it enough to pay more.
Loss leader A product is sold below its cost price in order to attract people to to the business so that they will buy other more profitable products.
Advantage of Loss leader It helps to clear out surplus stock or stock which is close to its use-by date.
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