Chapter 1 Flashcards
Refers to the total cost for customers to acquire the product and may involve both monetary and psychological costs such as the time and effort expended in the acquisition.
Price
It determines the value of a good or service to the buyers even to the sellers
Price
It is the amount of
money needed in order to acquire a product or service and its accompanying service.
Price
It is the amount of money charged for a product or service or the sum of the values that consumers
exchange for the benefits of having or using the product or service.
Price
The only element in the marketing ix the produces revenue
Price/pricing
expenses that vary directly with the level of production
Variable Costs
overhead costs are expenses that do not vary even if the level of production or sales changes
Fixed costs
not directly attributed to creating a product
or service.
Fixed costs
Five steps in developing pricing strategy
- Objective
- Broad pricing Policy
- Price Strategy
- Implementing Price Strategy
- Price Adjustments
The firm is interested in sales growth and/or maximizing market share.
Sales Based
The concern of the company is to increase sales by offering new product design, product lines, and promotional items
Sales Based
The firm is interested in maximizing profit, earning a satisfactory profit,
optimizing the return on investment, or securing an early recovery of cash
Profit-Based
Its thrust is to satisfy the investors/stockholders by providing them an immediate return of investment.
Profit Based
The firm seeks to avoid reasonable government actions, minimize
the effects of competitor actions, maintain good channel relations, discourage the entry of competitors, reduce demands from suppliers, and stabilize prices
Status quo Based
The goal of the company
is to maintain a good image of the community by creating projects/programs that protect
its welfare and goodwill
Status Quo Based
provides procedures, rules, and methods to act in one specific situation. It links prices with the target market, image, and other marketing elements. It makes sure that pricing decisions are coordinated by other sellers.
Broad Price Policies
Broad Price policies include
Penetration and Skimming Pricing
uses low prices to capture/attract the larger/mass market for a
product or service
Penetration Pricing
The preference of the mass majority of the market will be the basis of the price set
Penetration Pricing
uses high prices to attract the market segment more concerned with
product quality, uniqueness, or status than price
Skimming Pricing
The seller chooses a high price in order
to determine who will really patronize the product.
Skimming Pricing
are ways or some actions to accomplish the goals and objectives of the company
in gaining profit
Pricing Strategies
Price strategy can be classified into three different categories:
- Cost based price strategy
- Demand based price strategy
- Competition based price strategy
is when the firm sets prices by computing merchandise, services, and overhead costs than adding the desired profit to those figures
Cost Based Price Strategy
True or False
After combining all the expenses incurred during the production of the product, the seller must also decide the best profit as part of the price of a product is part of Cost Based pricing.
TRUE
T or F
Cost Based pricing is when the firm sets prices after researching consumer
desires and makes sure the range of prices is acceptable to the target market.
False. Demand based is when the firm sets prices after researching consumer
desires and makes sure the range of prices is acceptable to the target market.
The firms conduct researches regarding the saleability of the product. If the product meets the criteria of the market, the firm can raise the price of the product because it can assure profit based on the market demand
This is under what strategy?
Demand based Price strategy
is when the firm sets prices in relation to the
competitors. The entrepreneur must research the prices set by their competitors.
Competition Based Price Strategy
________is the firm readiness to sell the product which would be effective
if given an attractive price strategy
Implementing Price strategy
when one price is maintained over an extended period of time. Normally the price of the product will not be easily changed.
Customary Pricing
The entrepreneur must
consider the price of the product which is affordable to the majority of buyers.
Customary pricing
is when the price responds to cost fluctuations or differences in demand.
Variable Pricing
The entrepreneur must consider the law of demand and supply. If there are
sufficient supplies and few demands, the price will increase and vice versa
Variable Pricing
is when the price is charged to all customers buying the product or service under similar conditions
One Price Policy
The entrepreneur will set one price for all products available for sale even though they differ from design.
One price policy
is based on the customer’s ability to negotiate or buy the power of the
customer
Flexible pricing
The entrepreneur must meet the needs and wants of the customer so that they
need to adjust the price just to ensure continued patronage and loyalty.
Flexible Pricing
is prices set at levels below even values. The entrepreneur uses odd numbers to attract customers in pricing a product
Odd pricing
is when the consumers believed that high price represents high quality and low prices represent low quality
Price quality association
is when customers set price floors and will not buy at prices below those floors. Above price ceilings, items would seem too expensive.
Prestige pricing
The entrepreneur must consider that products must follow the price floor and ceiling set by the government.
Prestige pricing
Is selling key items at low prices to gain consumer loyalty within its
product line.
Leader pricing
Under the pricing strategy, it is hoped that the customers will buy regularly priced products together with the specially priced one. The entrepreneur must be aggressive to win the respect of the competitors so as they can value the actions that will take place
Leader pricing
is when the entrepreneur offers discounts to consumers for buying in large quantities.
Multiple Unit pricing
The entrepreneur must consider that selling more units will produce more profits. To prevent overstocking and maintain proper inventory, selling in bulk can increase profit and promote growth
Multiple Unit pricing
is when instead of setting one price for a single model of a good or service,
the firm sells two models of different quality and features at different prices
Price Lining
is when the firm offers a basic product, options, and customer service
for one total price
Price Bundling
when the firm sells by individual components and allows customer to decide what to buy
Unbundled Pricing
The entrepreneur will set the price of the product item from the other. It can be sold separately and individually.
Unbundled Pricing
is when the prices are set depending on the distance of the buyer to the seller. Normally this activity is done if both parties are or from each other.
Geographic Pricing
when the buyer pays for all freight charges regardless of the distance.
FOB Factory
The buyer must be willing to pay all the expenses incurred during the transfer of the
product from one place to another
FOB Factory
is when buyers pay the same delivered price for the same quantity of goods. The entrepreneur shall consider the number of goods in setting the price of the product.
Uniform Delivered Pricing
is when the buyers within the geographic zone pay a uniform delivered
price. The entrepreneur must provide the same measure of charges to one particular
location
Zone Pricing
when the cost of transporting the goods is computed from the base point nearest buyer
Base point pricing
price agreements, including discounts, the timing of
payments, and credits agreements
Terms of Payment
are a reduction in the selling price
given to customers for varying reasons: paying in cash, performing certain
functions, buying in large quantities, and off-season buying
Discounts
Changes in cost, competitive conditions and consumer demand require
changes in price.
Price Adjustments
are regularly quoted prices to customers, as in catalogs, price tags, and purchase orders
List Prices
happen when the contract which allows price increase after the sale is concluded before delivery is made
Escalator clause
The seller must communicate to the
buyer that there is a price adjustment due to some reasons and must agree to the new price
Escalator clause
is supplementary to list prices.
Surcharge
These are additional charges added to the total price. The seller can include this or disregard to better gain customer loyalty and profitability of the company
Surcharge
happens when the company is raising regular selling prices because demand is unexpectedly high, or costs are rising
Mark-ups
are reductions from original selling prices to meet lower prices of competitors, overstocking, shop-worn merchandise, and increase customer traffic
Markdowns
setting the price steps between various products in a product line
based on cost difference between the products, customer evaluations of different features and competitor‘s price
Product line pricing
the pricing is along with the main product.
Optional product pricing
setting a price for products that must be used along with a main
products that must be use along with a main products, such as blades for razor and film for
a camera.
Captive product pricing
setting a price in order to make the main product‘s price more competitive
By-product pricing
combining several products and offering the bundle at a reduced price.
Product bundle pricing
a straight reduction in price on purchase during a stated period of time.
Discount and allowance pricing
selling a product or service at two or more prices, where the difference in prices is not based on different cost
Segmented pricing
A pricing approach that considers the psychology of prices and not simply the economics; the price is used to something about product
Psychological pricing
temporarily pricing products below the list price and sometimes even below cost to increase short ruin sales
Promotional Pricing
A company also must decide how to price its products for customers located in different parts of the country or world.
Geographical Pricing
Companies that market products internationally must decide what
prices to charge in the different countries
International Pricing
Supermarkets and department stores often drop the price on well Known brands to stimulate additional store traffic
Loss-leader pricing
Sellers will establish special prices in certain seasons to draw in more customers
Special Event pricing
True or false
Manufacturers of loss-leader brands typically object because this practice can dilute the
brand image and bring complaints from retailers who charge the list price.
True
Sellers will establish special prices in certain seasons to draw in more customer
Special event pricing
Auto companies and other consumer-goods companies offer this to encourage purchase of the manufacturers‘ products within a specified time period.
Cash Rebates
can help clear inventories without cutting the stated list price.
Rebates
Instead of cutting its price, the company can offer this to attract customers
Low interest financing
Sellers, especially mortgage banks and auto companies, stretch loans over longer periods and thus lower the monthly payments
Longer Payment
Companies can promote sales by adding a free or low- cost warranty or service contract.
Warranties and service contracts
This strategy involves setting an artificially high price and then offering the product at substantial saving
Psychological discounting
Different customer groups are charged different prices for the same product or service. For example, museums often charge a lower admission fee to students and senior citizens
Customer segmented pricing
Different versions of the product are priced differently but not proportionately to their respective costs.
Product form pricing
Some company‘s price the same product two different levels based on image differences at
Image pricing
Coca-Cola carries a different price depending on whether it is purchased ill a fine restaurant, a fast-food restaurant, or a vending machine
Channel Pricing
The same product is priced differently at different locations even though the cost of offering at each location is the same
Location Pricing
Prices are varied by season, day, or hour.
Time pricing
To determine the right price:
- The customer’s perception of the value of the kind of business firm;
- The costs involved such as overhead, storage, financing, production, and distribution; and,
- The profit objectives of the firm
this method covers all costs, variable and fixed, plus an extra increment to deliver profit
Cost plus pricing
this is a method of pricing where the firm sets prices based on buyer desires. The range acceptable to the target market is determined.
Demand pricing
this method of pricing calls for price-setting on the basis of prices charged by competitors
Competitive pricing
This is a form of cost-oriented pricing in which the firm sets prices by adding per-unit merchandise costs, operating expenses, and desired profit
Market Pricing
what are the two factors that influence Price determination
Internal and External
True or False
The marketing objectives, marketing mix strategy, and the cost-plus
pricing strategy is under external factors
False. The marketing objectives, marketing mix strategy, and the cost-plus
pricing strategy is under Internal factors
What are the external factors in pricing strategy?
Market demand
Competitors’ strategy
Economic and other social concerns
