Ch 11 Flashcards
5 C’s of Pricing
Competition, costs, company objectives, customers, channel members
Demand curve
as price decreases, demand increases
Price Elasticity of Demand
how consumers respond to price increases or decreases
% change in QD/ % change in p
Break even point (units)
fixed costs / contribution per unit
Competition
Monopoly, monopolistic competition, oligopoly, pure competition
Monopoly
One firm controls the market
Oligopoly
A Handful of firms control the market
Monopolistic Competition
May firms selling differentiated products at different prices
Pure Competition
Many firms selling commodities for the same price
Pricing Methods & Strategies
cost based, value based, competitor based
Cost-Based Pricing Methods
Determines the final price to charge by starting with the cost.
Competitor-Based Methods
May set prices to reflect the way they want consumers to interpret their own prices relative to the competitor’s offerings.
Value-Based Methods
An approach to setting prices that focuses on the overall value of the product offering as perceived by the consumer
Pricing Strategies
Everyday Low Pricing (EDLP)
High/Low Pricing
New Product Pricing
Everyday Low Pricing (EDLP)
Companies stress the continuity of their retail prices at a level somewhere between the regular non sale price and the deep-discount sale prices that their competitors may offer
High/Low Pricing
Relies on the promotion of sales, during which prices are temporarily reduced to encourage purchases
New Product Pricing
Price Skimming or market penetration
price skimming
initial high price, inelastic
Market Penetration Pricing
initial low price, elastic
Pricing Tactics - Consumers
price lining, price bundling, leader pricing
Price lining
Establishing a price floor and a price ceiling for an entire line of similar products and then setting price points in between to represent distinct differences in quality.
Price bundling
Pricing of more than one product for a single, lower price.
Leader pricing
Building store traffic by aggressively pricing and advertising a regularly purchased item, often priced at or just above the store’s cost.
B2B Price tactic
Seasonal discounts
Cash discounts
Allowances
Quantity discounts
Uniform delivered versus geographic pricing
