ch 11 Flashcards
Cost-based Pricing vs Value-based Pricing
Cost-based: convince buyers of the product’s value
- ‘wrong way’
Value-based: assess customer needs and values, then design a product to deliver desired value at target price
- ‘right way’
Good-value Pricing
Right combination of quality and good service at a fair price
involves fixed costs, variable costs and total costs to calculate breakeven pricing (FC / Price - VC)
Value Added Pricing
Attached value-added features and services
- differentiates from competitors
Price Elasticity of Demand
- how do consumers respond to price changes
= % change in quantity demanded / % change in price
Market Skimming Pricing
Setting price HIGH for a new product to skim max revenue from each layer of ‘willing to pay’ segments
- fewer sales, but more profit
Market Penetration Pricing
Setting LOW initial price to penetrate market quickly and deeply to attract a large # of buyers & win market share
Product Line Pricing
Set price steps between various products in a product line
- established price floor and ceiling
- easy comparison between brands
Optional Product Pricing
Pricing of optional or accessory products along with a main product
- phone needs a phone case, headphones, chargers, etc.
Captive Product Pricing
Setting a price for products that MUST be used along with product
- printer & printer ink
Product Bundle Pricing
Combining several products & offering the bundle at a reduced price
- helps sell slow-moving items
- incentive to purchase
Reference Pricing
Comparing actual price to a reference price to facilitate evaluation
- winners (actual vs our price)
