Pricing Strategies
Cost-plus pricing
What pricing strategy involves setting prices based on the cost of production plus a markup?
Elasticity of demand
What economic principle describes how much the quantity demanded changes in response to a price change?
Inflation, recession, etc
Name one major economic factor that can significantly impact pricing decisions
Price skimming
A luxury car brand typically uses which pricing strategy?
Penetration pricing sets low prices to gain market share quickly, while price skimming sets high prices initially to maximize profits from early adopters.
Explain the difference between penetration pricing and price skimming.
Brand loyalty leads consumers to consistently choose familiar brands, often regardless of price differences
How does brand loyalty affect consumer purchasing decisions?
It might force them to raise prices or reduce profit margins
How might a sudden increase in raw material costs affect a company's pricing strategy?
They might offer discounts, bundles, or subscription models
How might a company adjust its pricing strategy to target a younger demographic?
Advantages include higher profit margins and stronger brand image.
disadvantages include difficulty in accurately assessing customer perceived value.
Discuss the advantages and disadvantages of value-based pricing.
The difference between what a consumer is willing to pay and what they actually pay
Explain the concept of consumer surplus.
They increase the cost of goods and services, potentially leading to higher prices for consumers
How can government regulations, such as taxes or tariffs, influence pricing decisions?
By offering different versions of a product or service at different price points
How can a company use price differentiation to target multiple market segments?