Flashcards on Business Startup Planning Guide
Business Startup Planning Guide: Your Path to Success
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Marketing & sales — Pricing
23 cards
Card 1
Question: Why is pricing a product/service challenging for a business?
Answer: If priced too high customers won't buy and may put you out of business; if priced too low you may not make enough profit or customers may perceive low
Card 2
Question: Why is it important for a start-up to set the right price from the beginning?
Answer: Raising prices soon after launch can cause backlash that may be especially damaging for a new business, so it's important to avoid frequent early incr
Card 3
Question: What four things must you know regardless of the pricing method you choose?
Answer: You need to know the market, your customer, the competition, and your costs.
Card 4
Question: What is cost-plus pricing?
Answer: Cost-plus pricing adds a markup (usually a percentage) to the cost of producing the product/service to achieve a profit.
Card 5
Question: What are two limitations of cost-plus pricing?
Answer: It ignores customer value and can overlook hidden costs, reducing true profit; it's also hard to change prices frequently when costs fluctuate because
Card 6
Question: What is value-based pricing?
Answer: Value-based pricing sets price based on how much the customer believes the product/service is worth, focusing on the customer's perceived total experi
Card 7
Question: How can a business influence value-based pricing?
Answer: By increasing the perceived value through improving the customer's total experience (e.g., features, service, presentation), which raises what custome
Card 8
Question: What is competition-based pricing and when is it commonly used?
Answer: Competition-based pricing sets prices based on what competitors charge. It's commonly used for businesses selling similar products where product featu
Card 9
Question: How should pricing strategy change when competition is high versus low?
Answer: With high competition you may keep prices low to compete or increase the value offered; with low competition you can often keep prices higher.
Card 10
Question: What is charge-per-hour pricing and when is it commonly used?
Answer: A pricing method used by service-based businesses and independent contractors where they charge customers by the hour, factoring in all business costs