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Marketing Final > Chapter 11: Pricing Concepts and Strategies > Flashcards

Chapter 11: Pricing Concepts and Strategies Flashcards

1
Q

difference in pricing from other 4 P’s

A

very hard to change relative to the others

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2
Q

revenue =

A

price x quantity

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3
Q

why is pricing important

A

major component of firm revenue

influence purchase decision

signals value

signals quality

signals a firm’s competitive position

use to establish value creation in marketing mix

PRICING IS EXTREMELY IMPORTANT AND WE MUST GET IT RIGHT THE FIRST TIME

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4
Q

shrinkflation

A

why the food packages you buy at the grocery store continue to become smaller (companies slowly making packaging smaller even at same price)

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5
Q

the role of price in the marketing mix

A

price is usually ranked as one fo the mist important factors in purchase decisions

price is the only element in the marketing mix that generates revenue

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6
Q

the 5 C’s of pricing

A

company objectives

customers

costs

competition

channel members

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7
Q

company objectives

A

profit oriented: focus on profit levels

sales oriented: focus on increasing sales and market share

competitor oriented: focus on competitive position

customer oriented: focus on matching customer expectations

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8
Q

customers

A

demand and supply - key tool

price elasticity of demand

elastic (price sensitive)
inelastic (price insensitive)

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9
Q

factors that affect elasticity

A

income effect

substitution effect

cross-price elasticity

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10
Q

costs

A

variable costs: vary with production

fixed costs: unaffected by production volume

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11
Q

total cost:

A

variable + fixed

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12
Q

total variable cost:

A

variable cost per unit x quantity

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13
Q

total revenue

A

price x quantity

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14
Q

break even point

A

tfc/cmu

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15
Q

cm

A

price-tvc

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16
Q

types of competition (4)

A

monopoly: single seller
oligopoly: few sellers
monopolistic competition: many sellers, intense price competition - differentiation is key
pure competition: many sellers - commodities - usually price takers but try some differentiation

17
Q

Macro influences on pricing (4)

A

technological factors like internet: increased info; price comparisons, etc.

economic factors: increased disposable income, increased status consciousness, increased globalization, local economic conditions, cross-shopping

regulatory factors: cost of complying with government regulations, trade policies: tariffs, quotas, non-tariff restrictions, etc.

pricing strategies: cost-based, competitor-based, value-based

18
Q

new product pricing and consumer adoption cycle

A

innovators (2.5%)
early adaptors (13.5%)
*not price sensitive

early majority (34%)
late majority (34%)
*price sensitive

laggards (16%)
*very price sensitive (lil bit of late majority included)

19
Q

new product pricing strategies: price skimming

A

applied to new products, especially innovative

customers usually innovators and early adopters in PLC model

recoup R&D costs

signal quality

limit demand while ramping up production

20
Q

new product strategies: market penetration pricing

A

set initial prices low to encourage customers to buy early and to discourage competitors

risk leaving money on the table

build sales, market share and profits quickly

costs tend to fall as volume increases

profits through volume

21
Q

psychological factors affecting pricing strategies (4)

A

reference pricing: pricing based on your own judgement (internal = own prior knowledge, external = buy 2 get one free)

everyday low pricing: value is created in different ways (flyers at loblaws with weekly deals)

Odd prices: 7.49, 8.99, etc.

price0quantity relationship: more quantity = slightly less costs

22
Q

MSRP

A

manufacturer suggested retail price

23
Q

Consumer pricing tactics (3)

A

price lining

price building

leader pricing

24
Q

price lining

A

price floor and price ceiling - offer multiple versions of product allowing for easy comparisons

25
Q

price bundling

A

encourage sales of slow moving items

encourage stock up

encourage trial of new brand

incentive to purchase

26
Q

leader pricing

A

(must be able to cover your cost)

enticing consumers into the store with the popular aggressively priced item and hoping they will pick up other items while shopping

loss leader pricing (when you drop price so steep that it falls below your costs)

27
Q

consumer price reductions:

A

generate traffic
get rid of slo moving items
high/low tactic

28
Q

coupons and rebates

A

coupons: retailer handles
rebates: manufacturer issues

29
Q

seasonal discounts

A

spur early buying; get rid of early items

30
Q

quantity discounts for consumers

A

the more you buy the cheaper the unit cost

31
Q

B2B pricing tactics and discounts (5)

A

seasonal: an additional reduction offered as an incentive to retailers to order merchandise in advance of the normal buying season

cash discounts: an additional reduction the reduces the invoice cost if the buy payer the invoice prior to the end of the discount period

allowances: advertising or listing allowances offered in return for specific behaviours. advertising allowances are offered to retailers if they agree to feature the manufacturer’s product in their advertising promotional efforts. listing allowances are offered to get new products into stores or to gain more or better shelf space.

quantity discounts: providing a reduced price according to the amount purchased.

uniform delivered versus geographic pricing: with uniform delivered pricing, the shipper charges one rate, no matter where the buyer is located. with geographic pricing, different prices are charged depending on the geographical delivery area.

32
Q

deceptive pricing

A

deceptive reference pricing, loss leader pricing, bait and switch

33
Q

predatory pricing

A

when a firm sets a very low price for one or more of its products it the intent to drive its competition out of business

34
Q

price discrimination

A

when firms sell the same product to different resellers at different prices, it can be considered price discrimination; usually, larger firms receive lower prices

35
Q

price fixing

A

practice of colluding with other firms to control firms

Marketing Final (9 decks)

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