Chapter 9: Pricing Considerations and Strategies.

Question 1

marketing objectives:

Answer 1

company must decide on its strategy for the product

Question 2

External pricing factors:

Answer 2

• market and demand
• competitors’ cost, prices and offers
• other external factors (economic conditions, government actions, reseller reactions and social concerns)

Question 3

Pricing strategies:

Answer 3

1. Cost based
2. Value base
3. Competition based
   new products
4. market skimming
5. market penetration

Question 4

Market skimming

Answer 4

skim revenue layer by layer from market -> fewer but more profitable sales in the beginning more and less profitable in the end

when?
high quality, entry barriers stop price cutters, not too expensive to produce in low quantaties

Question 5

product-mix pricing strategies

Answer 5

*Product line pricing- price across p line
*Optional product pricing- optional or accessories sold with main products
*Captive product pricing- products that have to be used with main product
* Byproduct pricing- low value byproducts to get rid of them or make money
* Product bundle- bundles sold together

Question 6

Discounts:

Answer 6

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

Question 7

Allowance:

Answer 7

promotional money paid by manufacturers to retailers in return for an agreement to feature the manufacturer’s products in some way (trade-in benefits, promotional)

Question 8

Segmented pricing:

Answer 8

selling a product or service at 2 or more prices, where the difference in price is not based on differences in costs.

Question 9

Phychological pricing

Answer 9

considers the psychology of prices and not simply the economics.
- customer usually perceive higher-priced products as having higher quality
- consumers use price less, when they can judge the quality of a product

Question 10

Promotional Pricing:

Answer 10

emporarily pricing products below list price and sometimes even below cost to create buying excitement and urgency.

Question 11

Geographical Pricing:

Answer 11

decision on how to price product according to the different locations of where it is sold:

Question 12

Price changing

Answer 12

initiating or responding

Question 13

Initiating to price changes

Answer 13

price cuts or increase

Question 14

price cuts reasons:

Answer 14

• excess capacity
• falling market share
• achieve market through lower costs.

Question 15

> price increases reasons:

Answer 15

• cost inflation
• overdemand (cannot supply all customers’ needs)