chapter 15 Flashcards
Factors influencing pricing decisions (4)
- Firm-level factors
- Product factors
- Environment factors
- Market factors
All cost factors in the distribution channel add up and lead to price escalation. The longer the distribution channel, the higher the final market price in the foreign market
Price escalation
A market structure characterized by a small number of sellers who control the market
Oligopoly
Exists if there is one seller in the market, such as a state-owned company. The seller has the control over the market and can soley determine the price of its product
Monopoly
High price asked in the begin and as more segments are targeted, the price will be gradually lowered
Price skimming
Price is asked that is currently the market price. Used if similar products already exist in the target market
market pricing
When the firm uses a ‘reversed’ price escalation to calculate backwards (from market price) to the necessary price
Reterogade calculation
Start with a low price, stimulates market growth and capture market shares. Requires mass markets and price-sensitive customers and reduction in unit costs
Penetration pricing
Combination of the experience curve (lowering the costs per unit with accumulated production of the product) with typical market price development within an industry
Experience curve pricing
A product priced below cost to attract consumers, who may then make additional purchases
Loss leader
Typically the case where two products are linked together: the original produt is priced very low, in order to get customers in and try the product. The follow-on product is then sold at a higher price
Buy-in/follow-on strategy
Pricing strategy by which a product or service is provided free of charge, but money is then charged afterwards for more advanced features or functionality
Freemium
