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MKT F24 > #8 PRICE > Flashcards

#8 PRICE Flashcards

1
Q

PRICE

A
  • Only element in mkt mix that directly generates REVENUE
  • Most flexible mix element
  • Highly visible tool
  • Influences customer perceptions of value, affect their buying decisions
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2
Q

What drives the company’s overall approach to pricing?

Sales orientation

A

maximize volume

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3
Q

What drives the company’s overall approach to pricing?

Profit orientation

A

maximize profit or return

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4
Q

What drives the company’s overall approach to pricing?

Competitor orientation

A

relative to competitors

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5
Q

What drives the company’s overall approach to pricing?

Customer orientation

A

Maximize value

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6
Q

The 5 Cs of Pricing

A
  1. Company objectives
  2. Customers. econ
  3. Costs
  4. Competition
  5. Channel Members
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7
Q

The 5 Cs of Pricing

Company

A

Pricing is alligned with comany goals

premium image may set higher prices

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8
Q

The 5 Cs of Pricing

Customers econ

A

customers reactions to price changes

demand curve, price elasticity, customers income, susb or complements

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9
Q

The 5 Cs of Pricing

Costs

A

Production costs set a baseline for pricing decisions
Determine the price level at which sales cover production costs

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10
Q

The 5 Cs of Pricing

Competition

A
  • Market Structure influences pricing
  • Firms must adjust prices based on rivals actions
  • Price Wars
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11
Q

The 5 Cs of Pricing

Channel Members

A

Manufactures, wholesalers and retailers affect pricing

manu adjust prices to achieve their OWN objectives

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12
Q

Pricing Methods and Strategies

A

Como las firms determinan el precio que le van a poner al product

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13
Q

Pricing Methods (5)

A
  1. Cost-Based Pricing
  2. Competitor-Based Pricing
  3. Value-Based Pricing
  4. Improvement Value Method
  5. Dynamic Pricing
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14
Q

Pricing Methods

Cost-Based Pricing

A

literal lo que me cuesta hacerlo, doesn’t reflec consumer demand or the competition

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15
Q

Pricing Methods

Competitor-Based Pricing

A

Adjust prices in response to competitors

les importa MARKET PRICES

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16
Q

Pricing Methods

Value-Based Pricing

A
  • Based on perceived customer value
  • what customers are willing to pay given the benefits they expect
  • subjective, value varies @ customers

ex. Stanley cup beca tik tok

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17
Q

Pricing Methods

Improvement Value Method

A
  • Sets prices based on the improvement value of a product
  • Justifies higher prices for a superior product improvement

ex. Stanley cup w/more capacity

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18
Q

Pricing Methods

Dynamic Pricing

A
  • Adjusts prices in **real time **based on demand
  • Industries like sports or travel

ex. Uber rate $ at noon, than at 3am

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19
Q

Pricing Strategies

A

Long-term pricing strategies based on 5C’s

Apply across all products of the firm

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20
Q

Pricing Strategies (3)

A
  1. EDLP
  2. High/Low Pricing
  3. New Product*2
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21
Q

Pricing Strategies

EDLP

A

Everyday Low Pricing
Prices are kept consistently low to reduce consumers’ time spent price-comparing
- may associate EDLP w/lower quality

example: Walmart

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22
Q

Pricing Strategies

High/ Low Pricing

A

Prices alteration de arriba a abajo to attract deal-seeking & price- sensative customers
- May reduce brand loyalty due to consumer wait times 4 sale

Example: @@@@

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23
Q

Pricing Strategies

New Product Pricing Strategies (2)

A
  1. Price skimming
  2. Market Penetration Pricing
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24
Q

New Product Pricing Strategies

Price Skimming

A

a product is initially priced high and then discounted over time.
- Limits initial demand to allow time for production

Example: Apple Watch

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25
Q

New Product Pricing Strategies

Market Penetration Pricing

A

Introduces new product at a low price to build sales volume and market share quickly
- Requires high production capacity, may have low quality

Example: Streaming services offering low suscriptions

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26
Q

Pricing Strategies

Emerging Strategies (3)

A
  1. Shrinkflation
  2. BNPL
  3. Digital Payment
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27
Q

Pricing Strategies

Shrinkflation

A

Reduces product size w/out changing price

Example: snack foods

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28
Q

Emerging Strategies

BNPL

A

Buy Now Pay Later
-allows consumers to spread the cost of even small purchases over weeks or months

pago a meses

29
Q

Emerging Strategies

Digital Payment

A

Increased demand for mobile and contactless payment options

30
Q

Pricing Tactics

A

Short-term price adjustments focused on specific components of 5C’s
- 2 adress immediate competitive threats

31
Q

Pricing Tactics (2)

A
  1. For consumers
  2. For channel Members
32
Q

Pricing Tactics

Pricing Tactics for Consumers (5)

A
  1. Price Linning
  2. Price Bundling
  3. Leader Pricing
  4. Add-ons
  5. Price Reductions
33
Q

Consumer Tactics

Price Linning

A

Selling different products at different prices

different hotel rooms rate

34
Q

Consumer Tactics

Price Bundling

A

Offers multiple products at a reduced combined price

combos de fast food

35
Q

Consumer Tactics

Leader Pricing

A

Aggresively prices a popular item to draw customers in

Example: @@@

36
Q

Consumer Tactics

Add-ons

A

Base price for main product and pay extra for complementary products

Plane ticket plus choose your seat or extra bag

37
Q

Consumer Tactics

Price Reductions

A

Reduce final prices, driving sales & encouraging customer loyalty

38
Q

Consumer Tactics

Price Reductions (4)

A
  1. Markdowns
  2. Quantity Discounts
  3. Coupons
  4. Rebates
39
Q

Price Reductions

Markdowns

A

Rebajas

To clear out slow-moving or seasonal

40
Q

Price Reductions

Quantity Discounts

A

Al mayoreo

Increases consumption and brand loyalty

41
Q

Price Reductions

Coupons

A

Cupones

instant discount that stimulates purchase behaviour

42
Q

Price Reductions

Rebates

A

Reembolsos

instant discount that stimulates purchase behaviour

43
Q

Pricing Tactics

Pricing Tactics for channel members

A

@@@@
geographic?

44
Q

Legal and Ethical Aspects of pricing

A

to prevent unfair competition and protect consumers

45
Q

Legal and Ethical Aspects of pricing

Deceptive or Illegal Pricing Advertising

A
  • Puffery (best deals in town) is allowed
  • specific false claims when untrue are illegal
46
Q

Legal and Ethical Aspects of pricing

Deceptive Reference Prices

A

Description: A reference price should be genuine, providing a legitimate comparison point for discounts.
* Examples:
Genuine vs. Fake Reference Prices: Setting a “regular price” without offering the product at that price for a reasonable time is deceptive.
10 de 12
* Tests: Competition Bureau uses volume and time tests to verify if a reference price is legitimate.
* Impact: Inflated reference prices mislead consumers into believing they’re receiving a deal, which is harmful and often illegal.

@@@@@

47
Q

Legal and Ethical Aspects of pricing

Loss Leader Pricing vs. Loss Leader (Below-Cost) Pricing

A
  • Description: While leader pricing offers discounts to draw traffic, loss leader pricing goes further by pricing items below cost, which can be unethical.
    Examples: “Buy one, get one free” deals that result in below-cost pricing are considered loss leader pricing.
  • Impact: Loss leader pricing can hurt small competitors, as larger firms use it to attract consumers, potentially creating unfair competition.

@@@@

48
Q

Legal and Ethical Aspects of pricing

Bait and Switch

A

Advertising a low-priced item to attract customers, then claim limitted stock to push for higher-priced alternatives

TV súper baratas pero ya no les queda ese modelo, mejor una más grande

49
Q

Legal and Ethical Aspects of pricing

Predatory Pricing

A

Setting Prices extremly low to eliminate competitors
- illegal beca restricts competitions

Example: WestJet airline, extreme low fares to eliminate competition

50
Q

Legal and Ethical Aspects of pricing

Price Discrimination

A

Selling the same product to different buyers at different prices
-** only illegal if it harms competition** @@@

different fares for kids/seniors @ bus?

51
Q

Legal and Ethical Aspects of pricing

Price Fixing

A

Collusion among companies to control prices, reducing competition
- horizontal and vertical PF

52
Q

Price Fixing

Horizontal PF

A

entre competitors

@@@@

53
Q

Price Fixing

Vertical PF

A

Agreements along supply chain to control resale prices

@@@@@

54
Q

At this price, what level of sales is required to cover costs?

A

Break even point@@@

55
Q

Price Elasticity

A

How much the demand changes when we change the price $

56
Q

Competition market structures @@@

A
  1. Monopoly
  2. Oligopoly
  3. Monopolistic competition
  4. Pure competition
57
Q

Monopoly

A
58
Q

Oligopoly

A
59
Q

Monopolistic Competition

A
60
Q

Pure Competition

A
61
Q

Decommoditize through…

A

Differentiation
if your product exists in an intensely competitive category, you must elevate your offer and create reasons to buy USP

62
Q

Formula:

Total Costs
(Total Fixed Cost + Total Variable Cost) x Number of Units.@@@@

A

TC = TFC (Total Fixed Costs) + TVC (Total Variable Costs)

TVC= Variable cost x Quantity

63
Q

Formula:

Total Revenue

A

Price x Quantity

lo que entra a la firm

64
Q

Formula:

Profit

A

Total Revenue - Total Costs

lo que se queda la firm

65
Q

Profit Formula

A

P$ x Q - (FC+VC x Q)

66
Q

Formula:

Break Even Point

A

Total Revenue = Total Costs

67
Q

Formula:

Break-even Price $

A

P= (FC + VC x Q) / Q

68
Q

Formula:

Break-even Quantity

A

Q= (FC+$0) / P-VC

69
Q

WHAT IS TARGET PRICE AND QUANTITY???@@@@

A

MKT F24 (10 decks)

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