Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

MKTG210 > Chapter 10: Pricing: Understanding and capturing customer value > Flashcards

Chapter 10: Pricing: Understanding and capturing customer value Flashcards

1
Q

What’s the definition of price

A

= It’s the amount of money charged for a product or service.

= It is what customers give up to gain the benefits of having or using the product or service.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What element in the marketing mix produces revenue

A

Price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

If Price is the element in the marketing mix that produces revenue what do the other elements represent

A

The other elements represent a cost

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What do we need to understand to set a price

A

We need to understand how much value the customer place on the benefits received from the product, then setting a price that captures that value

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What are the upper and lower limits in setting price

A

Customer perception of value set the UPPER limit for prices (External factor) = No demand above this price

Costs set the LOWER limit (Internal factor) = No profits below this price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What can affect customer’s perceptions of value

A

Competitor’s prices

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What is customer value-based pricing

A

It uses the buyer’s perception of value, NOT the seller’s cost, as the KEY TO PRICING.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

When is price considered

A

BEFORE the marketing program is set.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Is value-based pricing customer driven?

A

Yes. It focuses on how much customers are willing to pau based on the value they see

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Within the value-based pricing which is customer driven, What are the 2 main METHODS

A
  1. Good-value pricing
  2. Value-added pricing
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What is good-value pricing

A

= Offering the right combination of quality and fair pricing/good service at the right price

(e.g affordable product that still meet the customer’s needs)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What is Value-added pricing

A

= Charging higher prices but justifying them by adding unique features or services that enhance the product’s value in the eyes of the customer.
/

Attaches value added features & services to differentiate offers, support higher prices and build pricing power (avoid price competition &justify prices without losing market share)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Is cost-based pricing customer-driven

A

No. It’s product-driven.
= The price is set based on the costs of production plus a standard profit margin, regardless of customer perception.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Describe the process of cost-based pricing

A
  1. Design a good product
  2. Determine product costs
  3. Set price based of cost (added a standard profit margin)
  4. Convince buyers of product’s value
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Describe the process of Value-based pricing

A
  1. Assess customer needs and value perceptions
  2. Set target price to match the customer perceived value
  3. Determine the costs that can be incurred (TARGET COSTING) (determine what we’re going to have to pay)
  4. Design product to deliver desired value at target price.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

In the context of good value-pricing, what are existing brands trying to do

A

Redesigning to offer more quality for the same price

                   or  Same quality for a less price
17
Q

What does Everyday low pricing (ELP) involve

A

Everyday low pricing involves charging a constant everyday low price with no temporary prices (e.g no sales, discounts, promotions)

18
Q

What does High-low pricing involve

A

High-low pricing involves charging higher prices on an everyday basis but running frequent promotions to lower prices temporarily on selected items.

19
Q

What is competition based pricing

A

Competition based pricing is to set prices based on competitor’s strategies, costs, prices and market offerings.

+ comparing it to the value your product provides to customers

20
Q

What are some other consideration affecting price decisions

A

Before setting any prices, the marketer must understand the relationship between price & demand for their products

  • Pricing in different markets
  • Analyzing the price demand relationship
  • Price Elasticity of Demand
21
Q

What are the different types of markets

A
  • Pure competition
  • Monopolistic competition
  • Oligopolistic competition
  • Pure monopoly
22
Q

What is a Pure competition market

A

In pure competition, many firms sell identical or very similar products.

There are no barriers to entry and all firms are PRICE TAKERS = they can’t set their prices but must ACCEPT THE MARKET PRICE

examples includes agricultural markets like wheat or corn

23
Q

What is a Monopolistic Competition

A

A monopolistic competition is a market structure where many firms sell similar, but differentiated products
= they’re not identical but close substitutes

Firms have some control over their prices because of product differentiation.

examples include restaurants that sell similar food but different style menu and location

24
Q

What is an Oligopolistic competition

A

An oligopoly is a market dominated by a small number of firms that sell similar or identical product.

The goal for each firm is to become exclusive/dominant choice for consumers

These firms have SIGNIFICANT control over prices and their pricing decisions are interdependent (one firms price changes might influence the others)

One example is Airlines

25
Q

What is a Pure monopoly

A

Ina pure monopoly, only one firm sells a unique product or service with no close substitutes.

This firm has significant control over prices.

Barriers to entry are extremely high.

Ex: Utility companies (water or electricity) where one company usually controls the service in a region

26
Q

What does a demand curve show

A

The number of units the market will buy in a given period at different prices

27
Q

How are price and demand related

A

Normally price and demand are inversely related

eg Higher price = Lower demand

28
Q

What’s an exception to the inverse relationship of price and demand

A

For prestige products, higher price = higher demand when consumer perceive that higher prices indicate higher quality.

29
Q

What is price elasticity of demand

A

Price elasticity of demand is the response of demand to a change in price

30
Q

What is inelastic demand

A

In Inelastic demand, demand hardly changes when there is a small change in price.

eg of products: unique products, quality, prestige, lack of substitute product, low cost relative to income

eg Insulin, Basic utilities, Tobacco, Petrol

31
Q

What in an Elastic demand

A

in an elastic demand, demand change greatly for a small change in price

eg Soft drinks, Restaurant meals, Luxury goods. Consumers might should buy a cheaper alternative or substitute.

32
Q

What’s the formula for Price elasticity of demand

A

% change in quantity demanded / % change in price

33
Q

What are some other external factors that can influence pricing decisions (other than market type and demand)

A
  • Economic conditions
  • Reseller’s response to price
  • Government laws & price monitoring
  • Social concerns
34
Q

What are are 2 New-product pricing strategies

A
  • Market skimming pricing
  • Market-penetration pricing
35
Q

What is Market skimming pricing

A

Market skimming pricing involves introducing a product at high price and then gradually lowering the price over time to ‘skim off layers of the market’ (target different groups of customers.

36
Q

What must match the high price in market skimming pricing

A

The product quality and image must match the high price to justify it to consumers

37
Q

Why must the buyer want the product at the high price in market skimming pricing

A

The buyer must perceive the value of the product at that high price, ensuring demand at initial price point

38
Q

What about competitors in market skimming pricing

A

Competitors should not be able to enter the market easily, or they could reduce prices, making it harder to maintain high prices.

39
Q

What is Market-penetration pricing

A

It sets a low initial price in order to penetrate the market quickly and deeply, to attract a large number of buyers quickly and gain market shares. So they build a strong customer base

  • Economies of scale in production and distribution
  • Low prices must help keep competition out of the market.
  • Price sensitive market (market that don’t want to pay a lot)

MKTG210 (10 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions