Marketing Price Quiz Questions!

Cost Plus Pricing is a pricing strategy where a percentage is added onto the original cost of the product. This allows the company to ensure that they cover their costs and make a profit. By adding a percentage onto the cost, the company can determine the selling price of the product. This strategy is commonly used in industries where the cost of production is known and stable, and the company wants to ensure a consistent profit margin.

They are using a mark-up and using a profit margin.

Mark up example:
Products costs £2 and you want a 25% mark-up you would do £2 + 25% of £2 which equals £0.50 so you do £2 + £0.50 = £2.50.

Profit Margin Example:
If the product costs £2 and you want a 20% profit margin it means that £2 is 80% of the selling price.
80% = 200p
1% = 200 / 80 = 2.5p
100% = 2.5p * 100 = £2.50

A 25% mark-up means that the product is being sold for 25% more than the cost price, which would be £2 + 25% of £2 = £2 + £0.50 = £2.50. The profit margin is calculated as the profit divided by the selling price, so in this case, the profit margin would be (£2.50 - £2) / £2.50 = £0.50 / £2.50 = 20%. Therefore, a 25% mark-up does equal a 20% profit margin.

Penetration Pricing refers to a new product.
Price Skimming is a strategy that would already be in place.
Cost Plus pricing doesn't take into account what competitors charge.
Competitive Pricing would also work.

Profit Pricing and Sales Pricing are not pricing strategies because they are not commonly recognized or used as specific pricing strategies in business. Profit Pricing refers to the general practice of setting prices in order to maximize profits, which is a fundamental goal of any pricing strategy. Sales Pricing, on the other hand, is a vague term that could refer to any type of pricing strategy aimed at increasing sales, such as discount pricing or promotional pricing. However, it is not a specific pricing strategy with well-defined characteristics or principles.