Chapter 9 Flashcards
Price
The amount of money charged for a product or service, or the sum of the values that customers exchange for benefits of having used the product or service.
Customer Value Pricing Strategy
uses buyers’ perceptions of value as the key to pricing. Value-based pricing means that the marketer cannot design a product and marketing program and then set the price. Price is considered along with all other marketing mix variables before the marketing program is set.
Cost-based pricing
involves setting prices based on the costs of producing, distributing, and selling the product plus a fair rate of return for the company’s effort and risk. A company’s costs may be an important element in its pricing strategy.
Competition-based pricing
involves setting prices based on competitors’ strategies, costs, prices, and market offerings. Consumers will base their judgments of a product’s value on the prices that competitors charge for similar products.
Internal factors affecting a firm’s pricing decisions
- Company’s overall marketing strategy
- Objectives
- Marketing mix
External factors affecting a firm’s pricing decisions
- Nature of the market
- Demand
- Other environmental factors
Market-skimming price
Setting a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay the high price; the company makes fewer but more profitable sales.
Market-penetration pricing
Setting a low price for a new product in order to attract a large number of buyers and a large market share.
Product Line Pricing
Setting the price steps between various products in a product line based on cost differences between the products, customer evaluations of different features, and competitors’ prices.
Optional-Product Pricing
The pricing of optional or accessory products along with a main product.
Captive-Product Pricing
Setting a price for products that must be used along with a main product, such as blades for a razor and games for a video-game console.
By-product Pricing
Setting a price for by-products to help offset the costs of disposing of them and help make the main product’s price more competitive.
Product Bundle Pricing
Combining several products and offering the bundle at a reduced price.
Discount & Allowance Pricing
Reducing prices to reward customer responses such as volume purchases, paying early, or promoting a product
Segmented Pricing
Adjusting prices to allow for differences in customers, products, or locations.
