Chapter 10. Pricing

Question 1

What is the only element in the marketing mix that produces revenue?

Answer 1

Price

Question 2

What are the three major pricing strategies?

Answer 2

1. Customer Value-Based Pricing
2. Cost-Based Pricing
3. Competition-Based Pricing

Question 3

Customer Value-Based Pricing

Answer 3

Setting the price based on buyers’ perceptions of value rather than on seller’s cost.

Question 4

What are the two types of Customer Value-Based Pricing?

Answer 4

1. Good-Value Pricing
2. Value-Added Pricing

Question 5

Describe Good-Value Pricing and Value-Added Pricing

Answer 5

1. Good-Value Pricing offers the right combination of quality and good service at a fair price.
2. Value-Added Pricing attaches value-added features and services to differentiate a company’s offers that support their higher prices.

Question 6

Cost-Based Pricing

Answer 6

Setting prices based on the costs of producing, distributing, and selling the product plus a fair profit for the effort and risk.

Question 7

Describe Cost-Plus Pricing

Answer 7

adding a standard markup to the cost of the product.

Question 8

Describe Break-Even Pricing and Illustrate its Graph

Answer 8

Setting the price to break-even of making and marketing a product. Also used to set a price to make a target return.

Question 9

Competition-Based Pricing

Answer 9

Setting prices based on competitor’s strategies, prices, costs, and market offerings. Goal is to set prices according to relative value created versus competitors.

Question 10

What are internal factors affecting pricing decisions?

Answer 10

1. Overall Marketing Strategy, Objectives, and Mix
2. Organizational considerations

Question 11

Target Costing

Answer 11

Pricing that starts with an ideal price, then targeting cost to ensure the price is met.

Question 12

What are external factors affecting pricing d decisions?

Answer 12

1. The market and demand
2. The economy (recession affects brand)
3. Resellers, government, and social concerns