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Marketing > Chapter 6: Price > Flashcards

Chapter 6: Price Flashcards

0
Q

Who determines price?

A

Manufacturer

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1
Q

What is price?

A

Money exchanged
For ownership of product
Use of service

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2
Q

What is value?

A

The quantitive measure of worth

Of a product in exchange for something else

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3
Q

What is the equation for value?

A 
   Cost
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4
Q

How is the firm affected with pricing?

A

Profits

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5
Q

What is profit?

A

Sales- Cost

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6
Q

What is sales?

A

Quantity x price

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7
Q

What is cost?

A

Payment for
Materials/services
To produce final goods and services
To generate revenues

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8
Q

What are the components of total cost?

A

Fixed

Variable

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9
Q

What is fixed cost?

A

Constant Amount firm must pay

Regardless of output

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10
Q

What is variable cost?

A

Incurred in relation to production

Usually direct relation

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11
Q

What are the categories for product cost?

A

Direct

Indirect

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12
Q

What are examples of direct product cost?

A

Raw materials
Components/manufactured parts
R and D
Production workers labor costs

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13
Q

What are examples of indirect product costs?

A

Factory overheads
Finance expenses
Administration expenses
Marketing and selling cost

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14
Q

What is the goal of marketing in value?

A

To increase value

So that product becomes more inelastic

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15
Q

What is price elasticity of demand?

A

% change in quantity demanded relative to

% change in price

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16
Q

What are the factors affecting price elasticity?

A

Availability of substitutes
Necessities and frequency of use
Proportion of disposable income

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17
Q

How elastic are convenience goods? Why?

A

Elastic

Available substitutes

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18
Q

The two strategies is setting initial prices for new products are

A

Skim pricing

Penetration pricing

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19
Q

What products skim pricing is used for?

A

Specialty

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20
Q

What does skim pricing start with ?

A

A high price

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21
Q

What are the characteristics of the first layer of customers in price skimming?

A

Really desire product

Not price elastic

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22
Q

In price skimming, when do we go to the next layer?

A

Demand of precious later met

23
Q

In price skimming, when we go to the successive layers, price is lowered because

A

Customers are more price sensitive

24
Q

Price skimming stops when

A

No other layers would pay a higher price

25
Q

When is price skimming effective?

A

High quality image for product
Product genuinely distinctive
Enough customers willing to buy initial price
No competition (protection)
The product is in early stage of life cycle

26
Q

Why do customers have a high quality image of product in skim pricing?

A

High price= high quality

27
Q

The first layer of customers in skim pricing is important because they

A

Make sales profitable

28
Q

How is a new product protected from competition?

A

Barrier to entry

Patent

29
Q

Why are competitors avoided in skim pricing?

A

They can set lower prices

30
Q

Why is skim pricing used in early stages of product?

A

Because a low price will not generate greater revenue
Not many aware of product
Those aware are price inelastic

31
Q

What is penetration pricing?

A

Set a low initial price on the new product

Appeal immediately to the mass market

32
Q

For what goods is penetration pricing used?

A

Convenience

Shopping

33
Q

Penetration pricing is used for convenience and shopping goods because

A

It is easily copied

Imitative

34
Q

When is penetration strategy effective?

A

Can reach the mass market easily
Discourage competitions from entering the market
Product highly elastic demand
Economies of scale

35
Q

What happens when the mass market is quickly reached in penetration strategy?

A

Sales volumes substantial

Establish substantial market share

36
Q

How can companies using penetration strategy reduce competition?

A

Reason that lower prices mean lower profit margin
Lower price means high sales volume
For existing companies

37
Q

What does economies of scale achieve?

A

Substantial reductions in unit costs
Large scale operations

Volume make up for lower profit margin per unit of product

38
Q

What are the price adjustment strategies?

A 
Prestige pricing
Status quo pricing
Price lining 
Psychological pricing
Bundle pricing 
Loss leader pricing
39
Q

Why is price adjusted?

A

Stage in product life cycle

Market demand conditions

40
Q

What is prestige pricing?

A

Setting a high price

41
Q

Why do you set a high price in prestige pricing?

A

Customers conscious about

Status and quality will be attracted

42
Q

What is status quo pricing?

A

Pricing in line with competitors who sell similar products

43
Q

Why is status quo pricing used?

A

To avoid a price war

Maintain profits and market share

44
Q

What is price lining?

A

Setting a range or price points for a line of product

Setting a limited number of prices to sell related products

45
Q

What is psychological pricing also known as?

A

Odd pricing

46
Q

What does psychological pricing involve?

A

Setting a price at uneven amounts

Few dollars/cents under an even number

47
Q

How does psychological pricing affect?

A

consumers perceive it as a lower price

48
Q

When should odd pricing be avoided?

A

On higher priced items

49
Q

When will odd pricing lose its effect?

A

Overuse

50
Q

What is bundle pricing?

A

Sale of two or more products in a single package price

51
Q

What are the two products in a bundle?

A

First product: popular item

Second: less popular

52
Q

How does bundle pricing benefit consumers?

A

A lower total cost

Do not have to make separate purchases

53
Q

What is loss leader pricing?

A

Sale of a product at lower than usual price

Attract customers to purchase other items (normal profit margin)

54
Q

What is the aim of loss leader pricing?

A

Increase sales of other goods

Not the product on loss leader

55
Q

What is the difference between bundle pricing and sales promotion?

A

Bundle is permanent

Marketing (9 decks)

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