Chapter 11 Flashcards
when in survival mode a company should at least cover what costs?
Variable costs
Price penetration
Whole market price
– low price to “penetrate” the market
Price skimming
sell at high price before reducing to next price level and repeat
– high price to “skim” the market
What are 4 points to consider when comparing perceived value to price?
Reference Prices
Competitors
substitutes
marketing efforts
Programmed costs
result from attempts to generate sales volume
- advertising
- sales salaries
Committed costs
require costs to maintain the organization
- rent
- administration
- clerical salaries
How is price determined?
by what the consumer is willing to pay
steps in setting price
1- select pricing objective 2- determine demand 3- estimate company costs 4- know competitor's prices 5- select pricing method
elastic and inelastic demand
Price elasticity of demand is the percentage change in quantity demanded relative to a percentage change in price–measures how sensitive consumer demand is to change in price.
pricing requires the knowledge of
the company’s costs
the competitors’ prices
the customers
What are the four pricing approaches
Golden goose
value
Cost plus
Competitive
Golden Goose
Know own costs, and a lot about customer value
NOT understand competitors
Value
Know own costs, and a lot about customer value, and competitors
Cost plus
Know own costs, but not much about competitors and customers
Competitive
Know own costs, and a lot about competitors
NOT a lot about customers
