CH.9 - Pricing

Question 1

Ex: Skimming, bundle, competitive, target, yield management, price-leadership

Answer 1

Pricing Strategies

Question 2

The role is fundamental to contributing to overall profitability.

Communicates quality as consumers equate it with overall product quality. Generally, higher priced products are perceived to be higher quality (e.g., BMW 750 vs. Toyota Camry).

Communicates value (and quality), which is
important when product value (and quality) is not obvious to potential buyers.

Answer 2

Pricing Importance

Question 3

The money or other considerations (e.g., other goods and services) exchanged for the ownership or use of a product.

Answer 3

Price

Question 4

Setting prices based on consumers’ perceived value of a good or service.

Answer 4

Value Pricing

Question 6

Specify the role of price in an organization’s marketing and strategic plans.

ex: profit, return on investment, sales revenue, market share, social re

Answer 6

Pricing Objectives

Question 7

setting the highest initial price that customers who really need (e.g., cancer drug) or want (e.g., Motorola Razr) the product are willing to
pay.

product provides unique value, new or revolutionary, no competitors exis

Answer 7

Skimming

Demand-oriented pricing approach

Question 8

Setting a low initial price on a new product to gain market share.

Answer 8

Penetration Pricing

Demand-oriented pricing approach

Question 9

Setting a high price to attract quality- and/or status-conscious consumers.

Answer 9

Prestige Pricing

Demand-oriented pricing approach

Question 10

A psychological pricing tactic that involves setting a price a few dollars or cents below an even number (e.g., $34.98 or $999).

Answer 10

Odd-even Pricing

Demand-oriented pricing approach

Question 11

Charging different prices to maximize revenue. For example, hotels in Austin cost more during ACL or SXSW than other times of the year.

Answer 11

Yield Management

Demand-oriented pricing approach

Question 12

Marketing strategy that involves selecting one or more products to be sold below cost (i.e., at a loss to the retailer) to get customers in the door.

Answer 12

Loss leader pricing

Demand-oriented pricing approach

Question 13

Occurs when firms charge both initial and recurring prices (e.g., cellphone and usage).

Answer 13

Two-part pricing

Demand-oriented pricing approach

Question 14

Adjusting composition and features to achieve a desired price.
Introduces price steps within a product line and
strives to establish perceived quality differences
that justify the price differences.

Answer 14

Product-line pricing

Demand-oriented pricing approach

Question 15

Marketing tactic that involves offering two or more goods or services as a package deal for a discounted price.

Answer 15

Product-bundling Pricing

product mix pricing

Question 16

Technique that analyzes the relationship between total revenue and* total cost* to determine profitability (revenue - cost) at various levels of output.

BEPquantity = FC/UP-UVC

Answer 16

Break-even analysis

Question 17

• Variable cost
• Fixed Cost
• Target Profit
• Annual units
• Insensitivity to price per unit

Answer 17

Target Profit Pricing

Question 18

A graph relating quantity sold (demand) and price, which shows the maximum number of units that will be sold at a given price.

Answer 18

Demand Curve

Question 19

Product for which demand increases as price rises because people feel its higher price reflects greater status.

Answer 19

Veblen Good

Question 20

A product for which a higher price causes an **increase in demand. **
The increasein demand is due to the income effect of the higher price outweighing the substitution effect.

Answer 20

Giffen Good

Question 21

The percentage change in quantity demanded relative to a percentage change in price.

PED = % change in quantity demanded/ % change in price

inelastic and elastic demand

Answer 21

Price elasticity of demand

Question 22

• Demand for products that are considered necessities (e.g., heart surgery, insulin).
• A 1% increase in price produces less than a 1% decrease in quantity demanded.

Answer 22

Inelastic Demand

Question 22

• Demand for products that are not considered necessities (e.g., luxury car, yacht).
• A 1% increase in price produces more than a 1% decrease in quantity demanded.

Answer 22

Elastic Demand

Question 23

The manintaining of prices at a certain level by agreement between competing sellers.

Answer 23

Price-fixing

Legal and

Question 24

The action of selling the same product at different buyers, to maximize revenue and profit.

Answer 24

Price discrimination

Legal and ethical considerations

Question 26

Pricing scheme that is likely to mislead consumers and affect consumers’ behavior or decisions about the products offered for sale.

Answer 26

Deceptive pricing

Legal and ethical consideration

Question 27

Pricing of products so low that competitors cannot compete and are forced to leave the market.

Answer 27

Predatory Pricing

Legal and ethical consideration