CH.9 - Pricing Flashcards
Ex: Skimming, bundle, competitive, target, yield management, price-leadership
Pricing Strategies
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.
Pricing Importance
The money or other considerations (e.g., other goods and services) exchanged for the ownership or use of a product.
Price
Setting prices based on consumers’ perceived value of a good or service.
Value Pricing
Specify the role of price in an organization’s marketing and strategic plans.
ex: profit, return on investment, sales revenue, market share, social re
Pricing Objectives
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
Skimming
Demand-oriented pricing approach
Setting a low initial price on a new product to gain market share.
Penetration Pricing
Demand-oriented pricing approach
Setting a high price to attract quality- and/or status-conscious consumers.
Prestige Pricing
Demand-oriented pricing approach
A psychological pricing tactic that involves setting a price a few dollars or cents below an even number (e.g., $34.98 or $999).
Odd-even Pricing
Demand-oriented pricing approach
Charging different prices to maximize revenue. For example, hotels in Austin cost more during ACL or SXSW than other times of the year.
Yield Management
Demand-oriented pricing approach
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.
Loss leader pricing
Demand-oriented pricing approach
Occurs when firms charge both initial and recurring prices (e.g., cellphone and usage).
Two-part pricing
Demand-oriented pricing approach
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.
Product-line pricing
Demand-oriented pricing approach
Marketing tactic that involves offering two or more goods or services as a package deal for a discounted price.
Product-bundling Pricing
product mix pricing
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
Break-even analysis
- Variable cost
- Fixed Cost
- Target Profit
- Annual units
- Insensitivity to price per unit
Target Profit Pricing
A graph relating quantity sold (demand) and price, which shows the maximum number of units that will be sold at a given price.
Demand Curve
Product for which demand increases as price rises because people feel its higher price reflects greater status.
Veblen Good
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.
Giffen Good
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
Price elasticity of demand
- 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.
Inelastic Demand
- 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.
Elastic Demand
The manintaining of prices at a certain level by agreement between competing sellers.
Price-fixing
Legal and
The action of selling the same product at different buyers, to maximize revenue and profit.
Price discrimination
Legal and ethical considerations
Pricing scheme that is likely to mislead consumers and affect consumers’ behavior or decisions about the products offered for sale.
Deceptive pricing
Legal and ethical consideration
Pricing of products so low that competitors cannot compete and are forced to leave the market.
Predatory Pricing
Legal and ethical consideration
