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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

Botella de agua en concierto vs Oxxo

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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
# New Product Pricing Strategies Market Penetration Pricing
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
26
# Pricing Strategies Emerging Strategies (3)
1. Shrinkflation 2. BNPL 3. Digital Payment
27
# Pricing Strategies Shrinkflation
Reduces product size w/out changing price | Example: snack foods
28
# Emerging Strategies BNPL
Buy Now Pay Later -allows consumers to spread the cost of even small purchases over weeks or months | pago a meses
29
# Emerging Strategies Digital Payment
Increased demand for mobile and contactless payment options
30
Pricing Tactics
Short-term price adjustments focused on specific components of 5C's - 2 adress immediate competitive threats
31
Pricing Tactics (2)
1. For consumers 2. For channel Members
32
# Pricing Tactics Pricing Tactics for Consumers (5)
1. Price Linning 2. Price Bundling 3. Leader Pricing 4. Add-ons 5. Price Reductions
33
# Consumer Tactics Price Linning
Selling different products at different prices | different hotel rooms rate
34
# Consumer Tactics Price Bundling
Offers multiple products at a reduced combined price | combos de fast food
35
# Consumer Tactics Leader Pricing
set the price of a popular product lower than its usual price to attract customers into the store. | Supermarket: cheap milk at the end
36
# Consumer Tactics Add-ons
Base price for main product and pay extra for complementary products | Plane ticket plus choose your seat or extra bag
37
# Consumer Tactics Price Reductions
Reduce final prices, driving sales & encouraging customer loyalty
38
# Consumer Tactics Price Reductions (4)
1. Markdowns 2. Quantity Discounts 3. Coupons 4. Rebates
39
# Price Reductions Markdowns
Rebajas | To clear out slow-moving or seasonal
40
# Price Reductions Quantity Discounts
Al mayoreo | Increases consumption and brand loyalty
41
# Price Reductions Coupons
Cupones | instant discount that stimulates purchase behaviour
42
# Price Reductions Rebates
Reembolsos | instant discount that stimulates purchase behaviour
43
# Pricing Tactics Pricing Tactics for channel members
Geographically for retailers or wholesalers
44
Legal and Ethical Aspects of pricing
to prevent unfair competition and protect consumers
45
# Legal and Ethical Aspects of pricing Deceptive or Illegal Pricing Advertising
- **Puffery** (best deals in town) is allowed - specific false claims when untrue are illegal
46
# Legal and Ethical Aspects of pricing Deceptive Reference Prices
tactic used by retailers to make discounts appear more substantial than they actually are - Inflated reference prices mislead consumers into believing they're receiving a deal, which is harmful and often illegal. | de $100 a $60, es mucho descuento. Precio anterior $65
47
# Legal and Ethical Aspects of pricing Loss Leader Pricing vs. Loss Leader (Below-Cost) Pricing
* Loss Leader Pricing: The product is priced low but typically not below its cost. * Loss Leader (Below-Cost) Pricing: The product is priced below its cost, intentionally losing money to boost customer traffic or sales of other items. | Beca Predatory Pricing/ Unfair Competition
48
# Legal and Ethical Aspects of pricing Bait and Switch
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
# Legal and Ethical Aspects of pricing Predatory Pricing
Setting Prices extremly low to eliminate competitors - illegal beca restricts competitions | Example: WestJet airline, extreme low fares to eliminate competition
50
# Legal and Ethical Aspects of pricing Price Discrimination
Selling the same product to different buyers at different prices - illegal @ people - legal @ 4 competition | different fares for kids/seniors @ bus
51
# Legal and Ethical Aspects of pricing Price Fixing
Collusion among companies to control prices, reducing competition - horizontal and vertical PF
52
# Price Fixing Horizontal PF
coordination between competitors to inflate the price and gain more | pharmaceutical companies agreed 2 set a price on a specific drug
53
# Price Fixing Vertical PF
Agreements along supply chain to control resale prices | luxury watch sets certain price 2 all retailers, preventing discounts
54
At this price, what level of sales is required to cover costs?
Break even point
55
Price Elasticity
How much the demand changes when we change the price $
56
Competition market structures (4)
1. Monopoly 2. Oligopoly 3. Monopolistic competition 4. Pure competition
57
Monopoly
58
Oligopoly
59
Monopolistic Competition
60
Pure Competition
61
Decommoditize through...
**Differentiation** if your product exists in an intensely competitive category, you must elevate your offer and create reasons to buy USP
62
# Formula: Total Costs (Total Fixed Cost + Total Variable Cost) x Number of Units.@@@@
TC = TFC (Total Fixed Costs) + TVC (Total Variable Costs) | TVC= Variable cost x Quantity
63
# Formula: Total Revenue
Price x Quantity | lo que entra a la firm
64
# Formula: Profit
Total Revenue - Total Costs | lo que se queda la firm
65
Profit Formula
P$ x Q - (FC+VC x Q)
66
# Formula: Break Even Point
Total Revenue = Total Costs
67
# Formula: Break-even Price $
P= (FC + VC x Q) / Q
68
# Formula: Break-even Quantity
Q= (FC+$0) / P-VC

MKT F24 (10 decks)

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