Ch.10 Pricing Flashcards
Price references & reservations
References: external- marketers consider inflation, demand, substitute’s price, competition, consumer perception (industry & brand position)
Internal- cost, quality, version (cheap vs premium)
Reservations : max price people can or are willing to pay
Price
Broad: total value exchanged for a G or S’s benefits
Specific: Amount of money charged for a product or service
Can be called commission, tuition, fee, tip, rent…
Internal objectives of a company (5)
Survival Max profit Max market share Quality leadership Market stability
Marketing mix & MMStrategy
Price coordinated with place, product & promotion
Retail: price, display, feature ad
Value propositions in comparison to competitors (5)
\+4+ Starbucks \+4= pizza 73/ Timmy's =4- wal mart -4-- dollarama \+4- target
Pricing process and objectives
First: general mark strategy & value proposition
Then: price setting accordingly
Price can meet the objective of positioning but has to reflect packaging (como unos Ferrero de Easter son mas caros q los normales #edicion especial), promotion (no ser contradictorio), distribution (reflejar la imagen de donde lo vas a vender)
Internal factors that influence price (2)
Costs both fixed and variable
Top management views, pricing & marketing department decisions
(Overall mark strategy)
External factors influencing pricing (5)
Social concerns (ethical support or rejection ex: toms vs bp)
Government (taxes, restrictions like quotas)
Economic environment (inflation)
Elasticity of the product (demand)
Competitors (offers, costs, price)
Types of markets (4)
Pure competitive: uniform product like sugar, many competitors
Oligopoly: airlines (west jet)/ coke vs Pepsi; fewer sellers, more competitor sensibility
Monopolistic competition: very different products but many competitors, like cellphone industry
Monopoly: only one option (Epcor)
Elasticity vs in elasticity
Elasticity: demand is sensitive to price
Inelasticity: demand hardly changes
Major pricing strategies (3)
Cost based: cost is the minimum selling price; puede ser: SP= cost+ mark up, break even based = target return based. PERO, Los costs no son siempre conocidos, pueden tener un producto muy Barato de hacer por el que la gente pagaria miles (value can be more important), el mix fixed vs variable costs can be unfair or unattractive for both producer & consumer
Competition based: going rate- competitor’s prices before costs & demand, sealed bid- expectation of competitor’s move bc&d. Most price wars come from here (specially when geographic close), increase in market share not same as in erase in profit
Consumer value based: good value (best concert pianos for pros) OR value added (app upgrade) PERO, la gente no siempre esta educada en el valor (piano) o no es sincera cuando aprecian el valor del (piano), normalmente lo inflan
Other pricings (8) - specially for new products
EDLP (Walmart) HiLo- precio caro alternado con Baratas y promociones (ex: martens de tianguis todo a 30% menos) PWYW- internet site que Ella mostro, donde dieron el costo Skimming- precio empieza caro y va bajando (Apple) Penetration- precio empieza Barato y va subiendo Product mix- depende si el producto (product line (ipod different versions), optional (radio with a car?), captive (blades for a razor), bundle (mc trio),...)es parte de un mix Single price policy (dollarama) Prestige pricing (luxury because, for some, demand increases when price increases)
Price adjustment strategies (6)
Loss leadership- (put one thing at a lower than cost price in order for people to say oh I saved a lot and buy overpriced stuff)
Discount & allowances- (shelf space compensation)
Segmented- put same product at different prices according to segments (early vs late flight buyers)
Special event (Black Friday)
Psychological (99.99)
Dynamic- auctions on eBay
Price cuts & increases
Cuts when: excess capacity, competition threatens market share, wants market domination
Increases when: el costo de producir subio, over demanded products, wants to be market leader (apple)
Possible reactions to competitor’s low prices (5)
Hold your current price & monitor competitor Reduce price Raise perceived quality Improve quality Launch a fighting brand
*Ultimos 4 se dan a pesar de que profit & market share Serbian afectados #but=survival
