7: Pricing Strategy Flashcards
the act of determining the price of a product or service
Pricing
the set amount customers have to pay to purchase a product
Price
4 factors affecting pricing decisions
- Product cost and operating expenses
- Competitors
- Economic conditions
- Government laws and regulations
factor should involve the cost in manufacturing goods or offering services; includes raw materials, direct labor, and factory overhead
Product Cost
factor considering the cost of running the business; includes rent and utility, office supplies, marketing expenditures
Operating Expenses
Consumers sometimes based their purchase decision solely on the price of the product. If a competitors offers the same product with the same benefits at a lower price, the consumer would patronize the competitors product. This often leads to a price war.
Competitors
factor that has a very strong impact on consumer purchases and affects pricing decisions with which companies may choose to do cost-cutting methods to manufacture products at a lower cost while sacrificing the quality
Economic Condition
to sacrifice the quality of the product in order to manufacture them at a lower price
Cost-cutting
Factors that consider the imposed price by the government that changes through laws and regulations
Government Laws and Regulations
lowest price where the company can earn profit
Price floor
maximum price that customers are willing to pay for a given product
Price Ceiling
recognizing the price floor and price ceiling
General Pricing Strategies
Products are priced based on the maximum price that customers are willing to pay for the benefits that they will get out of the product
Value Based Pricing
Price based on the cost of manufacturing, distributing, promoting, and selling where a profit figure is added to the cost of the goods that decides their selling price
Cost Based Pricing
Prices based on the competitor’s price
Competition Based Pricing
Pricing strategy that is a “no-frills” approach; aims to attract the most price-conscious consumers
Economy Pricing
Business set costs higher because they have a unique product or brand that no one can compete with
Premium Pricing
Techniques that marketers use to encourage customers to respond based on emotional impulses rather that logical ones (599.99)
Psychological Pricing
when small businesses sell multiple products for lower rate than consumer would face if they purchased each item individually
Bundle Pricing
pricing that have both a main product and several secondary or accessory products that are needed for the main product to offer full value
Captive Pricing
when you charge different prices depending on who is buying your product or service or when they buy it
Dynamic Pricing
involves offering discounts on a particular product
Promotional Pricing
2 New Product Pricing Strategies
Market Skimming Pricing
Market Penetration Pricing
brands with an established credibility and a huge following opt to introduce a new product with high initial price to skim revenue layers from the market
Market Skimming Pricing
The company decides to offer a new product at low price to quickly penetrate the market.
Market Penetration Pricing
