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Marketing Exam 2 > Chapter 9 > Flashcards

Chapter 9 Flashcards

1
Q

Price

A

Amount of money charged for a product or service, produces revenue, most flexible of the marketing mix, and determines a firm’s market share and profitability

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2
Q

Pricing strategies

A
  1. Customer value based pricing
  2. Cost-based pricing
  3. Competition based pricing
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3
Q

Customer valued based pricing

A

Based on buyers’ perceptions of value rather than seller’s costs, price is considered before the marketing program is set

2 types:

  1. Good value pricing- offers just the right combination of quality and good service at fair price
  2. Value added pricing- involves attaching value added features and services to differentiate a company’s offers and then charging higher prices
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4
Q

Cost based pricing

A

Based on costs of producing, distributing, and selling product plus a fair rate of return for effort and risk

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5
Q

Types of costs

A

Fixed costs- rent, utilities, insurance, salaries, etc.

Variable costs- inputs, packaging, direct labor

TC=FC+VC

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6
Q

Types of cost based pricing

A
  1. Cost plus pricing (markup pricing)
    Adding a standard markup to the cost of the product
  2. Break even pricing
    Setting price to break even on the costs of making and marketing a product, or setting price to make a target return
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7
Q

Competition based pricing

A

Based on competitors’ strategies, costs, prices, and market offerings

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8
Q

Internal factors

A

Overall marketing strategy, objectives, and mix

Organizational considerations

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9
Q

External factors

A

Market demand

Economy

Impact on other parties in its environment

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10
Q

Target costing

A

Starts with an ideal selling price then targets costs that ensure that price is met

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11
Q

Nonprice positions

A

Can be created to differentiate the marketing offer

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12
Q

Organizational considerations

A

Management decides who should set prices; varies depending on size and type of company

  • small companies - top management
  • large companies - divisional or product managers
  • industries with price as key factor - pricing departments ex.) airlines, oil, steel
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13
Q

Pure competition

A

Many buyers and sellers trading in uniform commodity. No single buyer or seller has much effect on going market price

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14
Q

Monopolistic competition

A

Many buyers and sellers trading over a range of prices rather than single market price

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15
Q

Oligopolistic competition

A

Only a few large sellers

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16
Q

Pure monopoly

A

Market is dominated by single seller

17
Q

Demand curve

A

Shows number of units the market will buy in a given time period at different prices that might be changed

18
Q

Inelastic demand

A

Demand hardly changes with a small change in price

19
Q

Elastic demand

A

Demand changes greatly with a small change in price

20
Q

Economic factors impacting price strategies

A
  • boom or recession
  • inflation
  • interest rates

Responses to frugality of post recession consumers

  • cut prices and offer discounts
  • develop more affordable items
  • redefine value propositions
21
Q

Other external factors

A
  • how will resellers react to various prices?
  • government
  • social concerns
22
Q

Market skimming pricing (price skimming)

A

Setting high price for new products to skim max revenues. Makes fewer but more profitable sales

23
Q

Market penetration pricing

A

Setting a low price to attract a large number of buyers and a large market share

24
Q

Product line pricing

A

Determining price steps to set between various products in a product line based on cost differences between the products, customer evaluations of different features, and competitors’ prices

25
Q

Optional product pricing

A

Refers to pricing of optional or accessory products along with a main product

26
Q

Captive product pricing

A

Refers to setting a price for products that must be used along with a main product (ex. games for a video game console)

27
Q

By product pricing

A

Refers to setting a price for by products in order to make main product’s price more competitive

28
Q

Product bundle pricing

A

Refers to combining several products and offering the bundle at reduced price

29
Q

Discount

A

Straight reduction in price on purchases during a stated period of time or of larger quantities

30
Q

Allowance

A

Promotional money paid to retailers for an agreement to feature the manufacturer’s products in some way

31
Q

Segmented pricing

A

companies sells a product or service at two or more prices

  1. Customer segment pricing- differ customers pay differ prices for same product or service (student/senior discounts)
  2. Product form pricing- differ versions of products priced differently but not according to differences in costs
  3. Location based pricing- charging differ prices for differ locations, even tho cost of offering is the same
  4. Time based pricing- occurs when firm varies price by season, month, day or even the hour
32
Q

Psychological pricing

A

Considers psychology of prices and not simply the economics

33
Q

Promotional pricing

A

Temporarily pricing segments below the list price to increase short run sales

  1. Discounts and special event pricing
  2. Limited time offers and cash rebates
  3. Low interest financing and longer warranties
  4. Free maintenance
34
Q

Geographical pricing

A

FOB-origin pricing- goods are placed free on board a carrier. At the point that title and responsibility pass to the customer, who pays freight from factory to destination

Uniform delivered pricing- company charges the same price plus freight to all customers regardless of their destination

Zone pricing- company sets up zones. All customers within a given zone pay a single total price. The more distant the zone, the higher the price.

35
Q

Dynamic pricing

A

Adjusting prices continually to meet the characteristics and needs of individual customers and situations

Prevalent online where the internet introduces new age of fluid pricing

36
Q

International pricing

A

Set a uniform worldwide price and adjust prices of reflect local market conditions and cost considerations

Prices charged depend on many factors:
Economic conditions, competitive situations, laws and regulations, nature of the wholesaling and retailing system, consumer perceptions and preferences, company’s marketing objectives, costs of selling in another country

37
Q

Initiating price changes

A

Reasons for price cuts:

  • excess capacity
  • falling demand due to strong competition or weak economy
  • attempt to dominate the market fish market share through volume

Reasons for price increases:

  • costs inflation
  • over demand
38
Q

Buyers reaction/perspective to price changes

A

Price increase:

  • product more exclusive or better made
  • company being greedy

Price cut:

  • brand wants better deal on exclusive product
  • product quality is reduced
  • company image has been tarnished
39
Q

Competitors reaction/perspective to price changes

A

Price cut:

  • company is trying to grab larger market share
  • company doing poorly and trying to boost sales
  • company whats while industry to cut prices to increase total demand

Marketing Exam 2 (8 decks)

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