Ch. 9 | Pricing Flashcards

1
Q

Define Value Pricing

A

Value Pricing
increasing product or service benefits while maintaining or decreasing price

Value = percieved benefits / price

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2
Q

What is the equation to find profit?

A

Profit = total revenue - total cost

total revenue (unit price X quantity sold) - total cost

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3
Q

What are the 4 General Pricing Approaches?

A
  • demand oriented
  • cost orientated
  • profit orientated
  • competition oriented
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4
Q

What is the Demand-orientated pricing approach?

A

Demand Orientated
it emphasizes factors underlying expected customer tastes and preferences

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5
Q

What strategies are included in the demand-orientated pricing approach?

A
  • skimming
  • penetration
  • prestige
  • odd-even
  • target
  • bundle
  • yield management
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6
Q

What is involved in the skimming pricing strategy approach?

A

Skimming
setting the highest initial price to those who are willing to pay
- a firm introducing a new product

Eg. TVs

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7
Q

What is involved in the penetration pricing strategy approach?

A

Penetration
setting a lower, more affordable initial price on a new product to appeal immediately to the mass market

Eg. nintendo wii

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8
Q

What is involved in the prestige pricing strategy approach?

A

Prestige
setting a high price so that quality - or status-conscious consumers are attracted to the product

Eg. Rolex

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9
Q

What is involved in the odd-even pricing strategy approach?

A

Odd-Even
sets pricing a few dollars or cents under an even number
- $399.99 instead of $400.00

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10
Q

What is involved in the target pricing strategy approach?

A

Target
manufacturers deliberatley adjust the composition and features of a product to achieve the target price

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11
Q

What is involved in the bundle pricing strategy approach?

A

Bundle
markets two or more products as one in a single package

Eg. travel packages

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12
Q

What is involved in the yield management pricing strategy approach?

A

Yield Management
the charging or different prices to maximize revenue for a set amount of capacity at any given time

Eg. airline tickets, hotels

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13
Q

What is the cost-orientated pricing approach?

A

Cost Orientated
the price is set by looking at production & marketing costs and then adding enough to cover direct expenses, overhead, and profit

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14
Q

What strategies are included in the cost-orientated pricing approach?

A
  • standard markup
  • cost-plus
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15
Q

What is involved in the cost-plus pricing strategy approach?

A

Cost-plus
involves the summing of the total unit cost of a product and adding a specific amount to the cost inorder to arrive at a certain price

Eg. lawyers, service sector

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16
Q

What is the profit-orientated pricing approach?

A

Profit Orientated
a company may choose to balance both revenues and costs to set price.
- either set a target of a specific dollar volume of profit or as a % of sales or investment
- depends on accurate estimates of demand

17
Q

What is the competition-orientated pricing approach?

A

Competition Orientated
based on an analysis of what the competition is doing

18
Q

What is a demand curve?

A

Demand Curve
a demand curve is a graph that shows the number of products that will be sold at a given prive

19
Q

What are 3 key factors for the demand curve?

A
  • Want
  • Need
  • Price elasticity
20
Q

What is Total Revenue and its equation?

A

Total Revenue
is the total money received form the sale of a product
- TR = unit price X quantity sold
- TR = P x Q

TR = total revenue
P = unit price of the product
Q = quantity of the product sold

21
Q

What 2 things does total cost include and what is the equation of it?

A

Total cost = FC + VC
- fixed cost (FC)
- variable cost (VC)

22
Q

What are the 4 steps in setting a final price?

A

Step 1
- select an apprx. price level

Step 2
- set the list or quoted price

Step 3
- make adjustments to the price

Step 4
- monitor and adjust prices