Methods of Pricing and Promotion

What is market skimming?

• Setting a low price for a new product to attract customers quickly.

• Setting a high price for a new product that is unique or very different from other products on the market.

• Offering discounts on a new product to increase sales.

• Gradually lowering the price of a product over time to reach different market segments.

What does it mean if PED > 1?

• The demand is elastic; a higher % change in demand in response to a change in price.

• The demand is inelastic; a lower % change in demand in response to a change in price.

• The demand is perfectly elastic; demand changes infinitely with price changes.

• The demand is unitary elastic; % change in demand is equal to % change in price.

What are the advantages of market skimming?

• Profit earned is very high.

• It leads to lower prices for consumers.

• It increases market competition.

• Helps recover/compensate research and development costs.

What is a disadvantage of selling Manufacturer to Retailer to Consumer?

• The retailer takes some of the profit away from the producer.

• The consumer pays higher prices for products.

• The manufacturer has less control over product quality.

• The retailer has to manage inventory and storage.

What is the advantage of selling Manufacturer to Consumer?

• All of the profit is earned by the producer.

• The consumer gets lower prices due to reduced overhead.

• It allows for more marketing opportunities for retailers.

• It increases the number of intermediaries involved.

What factors affect the choice of pricing method?

• Uniqueness of the product

• Customer preferences

• Market trends

• Advertising budget

What is a disadvantage of market skimming?

• It may backfire if competitors produce similar products at a lower price.

• It guarantees high sales volume immediately.

• It reduces the perceived value of the product.

• It increases customer loyalty quickly.

What factors affect place decisions in marketing?

• Type of product

• Frequency of purchase

• Competitors' selling locations

• Brand reputation

What affects promotional decisions?

• Stage of product on the PLC.

• Brand loyalty of consumers.

• Advertising budget allocation.

• Market saturation levels.

What is loss leader pricing?

• Setting the price of a few products at below cost to attract customers into the shop.

• Pricing products at a premium to enhance brand perception.

• Offering discounts on all products to increase sales volume.

• Setting prices based on competitor pricing strategies.