Chapter 15 Strategic Pricing methods Flashcards
How is Cost-Based Pricing Calculated
(Fixed/Variable/Overhead + Profit) / Total Demand
Competition-Based Pricing
reflects the way they want consumers to interpret their own prices relative to competitors offerings
2 Approaches to Value-Based Pricing
COO & IVM
Improvement Value Method - How much/less consumers are willing to pay compared to other products
Cost of Ownership - Total cost of owning product over lifetime of product. Will it cost less?
Factors considered for implementing value based pricing
Require consumer research to determine
- Changing consumer sentiment
- How consumers in different segments will attach value to benefits delivered by products
3 Pricing Strategies
E, H, N
Everyday Low Pricing - Between Regular and deep discount
High/Low pricing - Reference price (price against which buyers compare actual selling price)
New Product Strategies - Market Penetration Pricing & Price Skimming
2 Components of New product Strategies
M, P
Market Penetration Pricing - Set prices low for introduction of new product
Price Skimming - Innovator appeal, high pricing…Common in technology
What is the Experience Curve Effect as it relates to market penetration pricing
Unit costs decline as volume sold increases
What are the 5 Cs of Pricing Strategy
Company Objectives Costs Customers Competition Channel Members
9 Pricing Tactics aimed at consumers
M, Q, S, C, R, L, B, L, L
Markdowns
Quantity Discounts
Seasonal Discounts
Coupons
Rebates - Manufacturer issued
Leasing
Bundling
Leader Pricing - Aggressively pricing and advertising
regularly purchased items..help generate traffic
Lining - Tiers of qualityPricing Tactics Aimed at Businesses
S, C, A, Q, U, Z
Seasonal Discounts - extra inventory, lower cost
Cash Discounts- reduces invoice cost if payed quickly
Allowances - Advertising Allowances & Slotting
Allowances
Quantity Discounts - Cumulative vs Noncumulative
Uniform Delivered -One rate for shipping
Zone Pricing - Different shipping rates for different
locations
Slotting Allowance
Advertising allowance
Fees paid to retailed to get new products in stores or get better shelf space
Price reduction to channel members for agreeing to feature manufacturer products in advertising
Cumulative Quantity discounts
Non cumulative Quantity Discounts
Uses amount purchased over time period..encourages resellers to maintain current suppliers
Based only on amount purchased in a single order
Loss Leader Pricing
Pricing items below store costs..illegal
Price Discrimination
When firms sell same product to different resellers at different prices (robinson Patman Act)
Price Fixing
Horizontal - illegal, competitors work together to control prices
Vertical - Parties in same marketing channel agree to control prices passed on to consumers
