Chapter 11 Flashcards
What are the 2 new product pricing strategies?
Market skimming pricing
Market penetration strategy
Market skimming pricing
Involves setting a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay the high price
The company makes fewer but more profitable sales
Market penetration strategy
Involves setting a low price for a new product in order to attract a large number of buyers and a large market share
What are the 5 product mix pricing situations?
Product line pricing
Optional product pricing
Captive product pricing
By product pricing
Product bundle pricing
Product line pricing
Involves setting the price steps between various products in a product line based on cost differences between the products, customer evaluations of different features and competitor’s prices
Optional product pricing
The pricing of optional or accessory products along with a main product
Captive product pricing
Involves setting a price for product that must be used along with a main product,
Such as blades for a razor and games for a video game console
By product pricing
Involves setting a price for by products to help offset the costs of disposing of them and help make the main product’s price more competitive
What are the 7 price adjustment strategies?
Discount pricing
Segmented pricing
Psychological pricing
Promotional pricing
Geographical pricing
Dynamic pricing
International pricing
Discount pricing
A straight reduction in price on purchases during a stated period of time or of larger quantities
Allowance pricing (part of discount pricing)
Involves promotional money paid by manufacturers to retailers in return for an agreement to feature the manufacturer’s products in some way
Segmented pricing
Involves selling a product or service at two or more prices, where the difference in prices is not based on differences in costs
Psychological pricing
Considers the psychology of prices and not simply the economics
The price is used to say something about the profits another aspect of psychological pricing is reference pricing
Reference pricing (part of psychological pricing)
Prices that buyers carry in their minds and refer to when they look at a given product
Promotional pricing
Temporarily pricing products below the list price, and sometimes even below cost, to increase short-run sales
Geographical pricing
Involves setting prices for customers located in different parts of the country or world
What are the 5 strategy types of geographical pricing?
FOB-origin pricing
Uniform delivered pricing
Zone pricing
Basing point pricing
Freight absorption pricing
FOB origin pricing
Good are placed free on board a carrier
The customer pays the freight from the factory to a destination
Uniform delivered pricing
The company charges the same price plus freight to all customers, regardless of their location
Zone pricing
The company sets up two or more zones
All customers within a zone pay the same total price
The more distant the zone the higher the price
Basing point pricing
The seller absorbs all or part of the freight charges in order to get the desired business
Dynamic pricing
Adjusting prices continually to meet the characteristics and needs of individual customers and situations
International pricing
Depends on many factors, such as economic conditions, competitive situations, laws and regulations, and the nature of the wholesaling and retailing system
What are the situations that may lead to a firm considering cutting its price
Excess capacity
Falling demand in the face of strong price competition or a weakened economy
Having a drive to dominate the market through lower costs
What are the situations that may lead to a firm considering increasing its price
Inflation
Rising costs
Over-demand
