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COMM 223 > chapter 10: pricing: understanding and capturing customer value > Flashcards

chapter 10: pricing: understanding and capturing customer value Flashcards

1
Q

price

A

the amount of money charged for a product or a service, or the sum of the values that customers exchange for the benefits of having or using the product or service

the most flexible P

only P that gives you cash

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2
Q

what are the major pricing strategies

A

Customer Value-Based

Cost-Based Pricing

Competition-Based Pricing

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3
Q

Customer Value-Based pricing strategy

A

they one you should strive for

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

Company first assesses customer needs and value perceptions, then sets a price based on customer perceptions of value

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4
Q

what is the price ceiling?

A

the max price that you could price a product to if you want customers to buy it

any price above won’t attract anything

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5
Q

what is price floor?

A

should be the cost of the product

if the company prices the product below its costs, company products will suffer

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6
Q

what sets price ceilings?

A

Customer perceptions of the product’s value set

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7
Q

what sets the price floors?

A

Product costs set the floor for prices

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8
Q

why is it hard to measure te customer perceived value?

A

because values are subjective and depend on the customer and situation

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9
Q

what are the 2 types of valued based pricing?

A

good value pricing

value added pricing

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10
Q

good value pricing

A

offering just the right combination of quality and good service at a fair
price

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11
Q

what does good value pricing involve?

A

Often involves introducing less expensive versions of established brand-name products

Other times, redesigning existing brands to offer more quality for a given price or the same quality for less

At the retail level, Everyday Low Pricing (EDLP) involves charging a constant, everyday low price with few or no temporary price discounts (Walmart)

High-low pricing

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12
Q

what is High-low pricing

A

charging higher prices on an everyday basis but running frequent promotions to lower prices temporarily on selected items

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13
Q

Value-Added Pricing

A

attaching value-added features and services to differentiate a company’s offers and charging higher prices

Rather than cutting prices to match competitors, companies attach value-added features and services to differentiate their offers and justify higher prices

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14
Q

what is the cost based pricing strategy

A

Setting prices based on the cost for producing, distributing, and selling the product plus a fair rate of return for effort and risk

company designs what it considers to be a good product, adds up the costs of making the product, and sets the price in a way that they can still make profit

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15
Q

what must marketers do after cost-based pricing?

A

must convince buyers that the product’s value at that price justifies its purchase

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16
Q

what are the type of costs?

A

fixed (overhead) costs

variable costs

total costs

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17
Q

fixed (overhead) costs

A

costs that do not vary with production or sales level

they do not change

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18
Q

variable costs

A

costs that vary directly with the level of production

they do change

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19
Q

total costs

A

fixed + variable costs

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20
Q

Cost-Plus Pricing (Mark-Up Pricing)

A

adding a standard mark-up to the cost of the product

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21
Q

what is a cost-plus pricing wank?

A

It ignores consumer demand and competitor prices

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22
Q

what are the advantaged of cost-plus pricing?

A

easier to price

when all firms in the industry use this pricing method, prices tend to be similar, minimizing price competition

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23
Q

Break-Even Pricing (Target Return Pricing)

A

setting price to break even point

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24
Q

what is the problem with real-even pricing?

A

fails to consider customer value

fails to consider the relationship between price and demand

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25
Q

Competition-Based Pricing

A

Setting prices based on competitors’ strategies, prices, costs, and market offerings

depends on how the consumer perceives the companyprovides customer value compared to competitors

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26
Q

if customers feels like a company provides more customer value than their competitors, how should the company price whatever they offer?

A

the company can charge a higher price

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27
Q

if customers feels like a company provides less customer value than their competitors, how should the company price whatever they offer?

A

the company must either ( charge less or change customer perception to charge more

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28
Q

internal factors affecting pricing

A

Overall Marketing Strategy

Objectives

Marketing Mix

organizational considerations

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29
Q

Overall Marketing Strategy

A

the company must decide on its overall marketing strategy before setting price

Pricing strategy is largely determined by decisions on brand positioning

ex: Honda developed its Acura brand to compete with European luxury-performance cars & so needed to to set prices in line with luxury performance cars

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30
Q

objectives as strategy

A

A firm can set prices to attract new customers or to profitably retain existing ones

keep the loyalty and support of resellers or to avoid government intervention

prevent competition

continue competing

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31
Q

setting prices low would do what to competitors

A

prevent them from entering

could also set prices at competitors’ levels to stabilize the market

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32
Q

why would prices be reduced even tho company still killing it?

A

to create excitement for a brand

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33
Q

true or false

One product may be priced to help the sales of other products in the company’s line

A

true

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34
Q

why musth the marketing mix be considered in the pricing strategy

A

Pricing decisions must be carefully coordinated with other marketing mix elements

Pricing decisions must be carefully coordinated with other marketing mix elements

includes target costing

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35
Q

target costing

A

pricing that starts with an ideal selling price, and then targets costs that will ensure that the price is met

ex: When Honda set out to design the Fit, it began with a $13,950 starting point and 33-miles-per-gallon operating efficiency firmly in mind

THEN, it designed a stylish, peppy little car with costs that allowed it to give target customers those values

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36
Q

what does the marketing mix allow you to do instead of just tryin to sell at the lowest price?

A

to differentiate the marketing offer to make it worth a higher price

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37
Q

why are organizational considerations in the marketing strategies?

A

important to determine Who within the company should set prices

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38
Q

what are the external factors affecting pricing decisions

A

The Market and Demand

The Economy

Other External Factors

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39
Q

what are the important factors to consider when considering the market and demand to price our products?

A

the different type of markets

the price-demand relationship

price elasticity of demand

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40
Q

what are the different types of markets?

A

pure competition

monopolistic competition

Oligopolistic Competition

Pure Monopoly

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41
Q

pure competition

A

market consists of many buyers and sellers trading in a uniform
commodity

ex: wheat, copper, or financial securities

Not much time spent on marketing strategy

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42
Q

do competitors in pure competition have any effect on the price?

A

nah bruh

there are so many competitors that they each have to adapt to the market price

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43
Q

Monopolistic Competition

A

market consists of many buyers and seller

they all trade over a range of prices rather than a single market price

Marketing matters!

44
Q

why do competitors in a monopolistic competition trade over a range of prices

A

sellers can differentiate their offers to buyers.

45
Q

Oligopolistic Competition

A

market consists of a few sellers who are highly sensitive
to each other’s pricing and marketing strategies

ex: Rogers, Bell, Fido, Telus

46
Q

Pure Monopoly

A

market consists of one seller

ex: market consists of one seller

47
Q

explain the Price-Demand Relationship

A

each price the company might charge will lead to a different level of demand

48
Q

price elasticity of demand

A

extent to which buyers will change their demand to change of product prices

49
Q

inelastic demand

A

if price changes, the quantity demanded practically won’t change

50
Q

elastic demand

A

slight price changes will completely change the quantity demanded

51
Q

the economic factor influencing pricing decisions

A

boom

a recession

interest rates

52
Q

why do economic factors affect pricing decisions

A

they affect consumer spending, consumer perceptions of the product’s price and value, and the company’s costs of producing and selling a product

53
Q

what are the other external factors affecting the pricing decisions?

A

Resellers

Government

Social concerns

54
Q

what are the two broad strategies of product pricing?

A

Market-Skimming Pricing

Market-Penetration Pricing

55
Q

Market-Skimming Pricing

A

setting a high price for a new product

goal is to skim maximum
revenues layer by layer from the segments willing to pay the high price

Enough buyers must want the product at that price

56
Q

what is the result of a successful market skimming pricing?

A

the company makes fewer but more profitable sales

57
Q

Market-Penetration Pricing

A

setting a low initial price for a new product

goal is to attract a large number of buyers and a large market share

to attract a large number of buyers and a large market share

58
Q

what is the result of a successful market-penetration pricing?

A

High volumes sales

falling costs

allows the company to lower their prices even further

59
Q

what are the 5 product mix pricing situations?

A

Product Line Pricing

Optional-Product Pricing

Captive-Product Pricing

By-Product Pricing

Product Bundle Pricing

60
Q

Product Line Pricing

A

setting the price steps between various products in a product line

ex: company offers some 20 different collections of bags from its laptop bags ranging from $20-$35, to it high-end luggage line, where a small suitcase retails at $500

based on cost differences between the products, customer evaluations of different features, and competitors’ prices

61
Q

Optional-Product Pricing

A

the pricing of optional accessory products along with a main product

ex: New cars offer sound systems, Bluetooth, GPS systems, and many other options

62
Q

Captive-Product Pricing

A

setting a price for products that must be used along with a main product

ex: blades for a razor, games for a video-game console, and ink for printers

63
Q

in captive-product pricing, why are sometimes the main products priced low?

A

to boost the prices of the necessary accessories

64
Q

By-Product Pricing

A

setting a piece for by-products to make the main product’s price more competitive

turning trash into cash

65
Q

Product Bundle Pricing

A

combining several products and offering the bundle at a reduced price

ex: fast food restaurants bundle a burger, fries and soft drink into a “combo”

66
Q

what are the 7 price adjustment strategies

A
  1. Discount and Allowance Pricing
  2. Segmented Pricing
  3. Psychological Pricing
  4. Promotional Pricing
  5. Geographical Pricing
  6. Dynamic Pricing
  7. International Pricing
67
Q
  1. what is discount pricing
A

a straight reduction in price on purchases during the stated period of time or on larger quantities

cash discount

quantity discount

seasonal discount

68
Q

cash discount

A

price reduction to buyers who pay their bills promptly

Ex: 2/10, n30

69
Q

quantity discount

A

price reduction to buyers who buy large volumes

70
Q

seasonal discount

A

price reduction to buyers who buy merchandise or services out of season

71
Q

allowances

A

promotional money paid by manufacturers to retailers

in exchange, manufacturers want their products featured in gyu ways

72
Q

Trade-In Allowance

A

price reductions given for turning in an old item when buying a new one

73
Q

Promotional Allowance

A

payments or price reductions to reward dealers for participating in advertising and sales support programs

74
Q
  1. Segmented Pricing
A

Selling a product or service at two or more prices

the difference in prices is not based on differences in costs

75
Q

what are the types of segmented pricing?

A

Customer-segment pricing

Product-form pricing

Location-based pricing

Time-based pricing

76
Q

Customer-segment pricing

A

different customers pay different prices for the same product or service

ex: Museums charge a lower admission for students and seniors

77
Q

Product-form pricing

A

different versions of the product are priced differently

not priced according to differences in their costs

ex: 1st class and economy seating on a flight

78
Q

Location-based pricing

A

a company charges different prices for different locations

ex: seating in a sports arena

79
Q

Time-based pricing

A

a firm varies its different prices by the season, the month, the day, and even the hour

ex: Cheapy Tuesdays at the movie theatre

80
Q

what is one very important thing to be cautious with regarding customer perceived value snd segment pricing?

A

Consumers in higher price tiers must feel that they’re getting the extra money’s worth

consumers in lower price tiers must not be treated as second-class citizens

81
Q
  1. Psychological Pricing
A

pricing that considers the psychology of prices and not simply the economics

price is used to say something about the product

ex: a $100 bottle of perfume may contain only $3 worth of materials, but consumers are willing to pay the $100 because this price indicates something special

82
Q

references prices

A

part of psychological pricing

prices that buyers carry in their minds and refer to when they look at a given product

ex: a company could display its products next to more expensive ones to imply that it belongs in the same class

83
Q
  1. Promotional Pricing
A

temporarily pricing products below the list price and sometimes even below cost

goal is to increase short-run sales

84
Q

what are the types of promotional pricing

A

discounts

Special-event pricing

Cash rebates

Low-interest financing

Longer warranties

Free maintenance

85
Q

what is a danger with promotional pricing?

A

if used too frequently, it can create “deal-prone” customers who wait until brands go on sale before buying them

86
Q
  1. Geographical Pricing
A

setting prices for customers located in different parts of the country or world

87
Q

what are the types of geographical pricing?

A

FOB-origin pricing

uniform-delivered pricing

zone pricing

88
Q

FOB-origin pricing

A

goods are placed free on board (FOB)

customers pays shipping

89
Q

Uniform-delivered pricing

A

company charges the same price plus freight to all customers, regardless of their location

90
Q

zone pricing

A

all customers within a given zone pay a single total price

a more distant zone pay a higher price

91
Q
  1. Dynamic Pricing
A

adjusting prices continually

goal is to meet the characteristics and needs of individual customers and situations

ex: consumers control pricing by bidding on auction site such a eBay or Kijiji

92
Q
  1. international pricing
A

companies that market their products worldwide must decide what prices to charge in the different countries in which they operate

93
Q

what does the international pricing strategy depend on?

A

economic conditions

competitive situations

laws and regulations

development of the wholesaling and retailing system

94
Q

what are the types of prices changes?

A

price cuts

price increases

95
Q

why are price cuts needed?

A

(1) excess capacity

(2) failing demand

96
Q

why are price increases needed?

A

(1) improve profits

(2) cost inflation

97
Q

what is a fighter brand?

A

adding a lower-price item to the line or creating a separate lower-price brand

98
Q

why are fighter brands created?

A

created explicitly to win back customers who have switched to a lower-priced rival

99
Q

what is the purpose of the Competition Act?

A

“to maintain and encourage competition in Canada in order to promote the efficiency and adaptability of the Canadian economy, in order to expand opportunities for Canadian participation in world markets while at the same time recognizing the role of foreign competition in Canada, in order to ensure that small and medium sized enterprises have an equitable opportunity to participate in the Canadian economy and in order to provide consumers with competitive prices and product choices”

basically, just remember its there to eliminate rats

100
Q

what does the Competition act prohibit

A

price fixing

bid rigging

predatory pricing

price discrimination

functional discounts

retail price maintenances

deceptive pricing

101
Q

what illegal practice corresponds to:

setting prices while talking to competitors

A

price fixing

102
Q

what illegal practice corresponds to:

where one party agrees not to submit a bit or tender in response to a call

agrees to withdraw a bid or tender submitted at the request of another party

A

bid rigging

103
Q

what illegal practice corresponds to:

selling below cost with the intention of punishing a competitor, or gaining
higher long-run profits by putting competitors out of business

A

predatory pricing

104
Q

what illegal practice corresponds to:

setting different prices to different types of customers who are willing to pay more or less for the same product

A

Price discrimination

105
Q

what illegal practice corresponds to:

offering a larger discount to wholesalers than to retailers

A

functional discounts

106
Q

what illegal practice corresponds to:

asking for dealers to charge a specific retail price for its products

A

Retail price maintenance

107
Q

what illegal practice corresponds to:

when a seller states prices that are not actually available to consumers

A

Deceptive pricing

COMM 223 (13 decks)

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