Chapter 13 - Pricing Flashcards
Pricing Objectives
- Profit
- Sales Growth
- Competitive Advantage
- Positioning
- Social
Brand equity
- Value to company, value to customers.
- Customers pay more for brands they trust and value.
3 C’s
- Cost (Variable vs. Fixed)
- Competition (Range)
- Customer (Final Say!)
Second market discounting/Yield mgmt pricing
Charge 1 price to primary target and charge a 2nd price (lower) to ancillary targets or segments.
Skimming
HIGH PRICE, LOW COMPETITION
- Take best part off of the top
- charge high price to innovators
- Good for new technology
Penetrating
HIGH COMPETITION, LOW PRICE
- Good warranty
- Low profit margin
Captive Pricing
- Contracts
- No one likes to be held captive
- 2 items must be used together so it makes you buy both no matter what.
Loss Leader
Offer low price for something to get you in the store and then may take a loss on the item, but make money on the other products.
Price Bundling
Putting several things together in a bundle.
- Usually better priced that creates value.
Multiple Unit Pricing
Buying same unit but in a larger quantity gives a better price.
Reference Pricing
Comparing 2 brands to each other and the prices encourage action from the customer to buy a certain brand.
Odd vs. Even
- 9 is the most powerful odd ending (discount or on sale)
- Even prices = professional services
- Odd prices = goods
- 0’s indicate quality to people
Prestige Pricing
Can charge very high prices.
- Emotional impact trumps (skier)
FOB Pricing
- Free on Board, Freight on Board
- Talks about transfer of ownership
- Shipping work with suppliers to a certain destination
- Cost of transporting is cost of customer
Periodic
A period where people know you will have a sale.
Random
Excess inventory and a need to get rid of products leads to lower prices offered.
Dynamic Pricing
Price changes based on supply and demand
Mark up on cost
Charge a percentage to customers above the cost to the firm.
Price Fixing
Working with a competitor to determine a price to charge to the customer.
- Illegal
Predatory Pricing
Your are charging prices so low to drive out competitors and then increase prices later.
- Illegal
Dumping
International business
- Foreign competitor can’t charge price in US lower than in home market.
- Illegal
Price discrimination
Can’t charge on group a different price than another group.
- B2B
Deceptive Pricing
Illegal to put pricing related material in the fine print.
Bait and Switch Techniques
- Pull customer into the store, but then when the customer comes in, the advertisement doesn’t exist or they don’t have the product advertised.
Discounting Objectives
- Quantity (if buy quantity = discount)
- Cash Flow (2/10 net 30)
- Inventory can be discounted.
Price Leadership
One firm sets its price and other firms in the industry follow with the same or very similar prices.
Freight Absorption Pricing
Seller absorbs the total cost of tranpsortation
List price
The price the end customer is expected to pay as determined by the manufacturer.
Dynamic Pricing
The price can easily be adjusted to meet changes in the marketplace.
Internal Reference Price
A set price or a price range in consumers’ minds that they refer to in evaluating a product’s price.
