CHAPTER TEN Flashcards
What is an integrated marketing program?
An integrated marketing program details how value will be delivered to the target customers. It turns marketing strategies into marketing tactics (actions).
What is price? [2]
In a narrowest sense, price is the amount of money charged for a product or service
More broadly, price is the sum of all the value that customers give up to gain the benefits of using a product or service
What is price versus cost?
Price is what a buyer pays for a product or service
Cost is the seller’s investment in the product sold
What is customer value based pricing?
Setting price based on buyers’ perceptions of value rather than on the seller’s cost.
What does value-based pricing mean?
Value-based pricing means that the marketer cannot design a product and marketing program and then set the price.
What are the Revenue and profit objectives? [2]
- Gain profit
- Cover cost
What are the patronage and User-base related objectives? [2]
- Build demand
- Develop a user base
What are the Strategy related objectives?
- Support Positioning strategy
- Support competitive strategy
What are the THREE major pricing strategies?
- Cost-based pricing
- Competitor-based pricing
- Value-based pricing
What is cost-based pricing?
Cost-based pricing can be defined as setting prices based on the costs of producing, distributing, and selling the product plus a fair rate of return for effort and risk
A company’s cost is an important element in its _________ strategy
pricing
What is the main ideology behind cost-based pricing?
The main ideology behind cost-based pricing, is to price such that you are able to cover your business costs with your sales while making minimum profits
What viewpoint do businesses adopt?
Some businesses adopt an opposite viewpoint, they purposefully take on higher costs to produce high quality products which they can charge more for
What are the types of costs? [3]
- Fixed cost
- Variable Cost
- Total cost
What is the type of costs formula ? [3]
Fixed costs + Variable costs = Total costs
What are the types of cost-based on pricing?
- Cost-plus pricing: also called mark-up pricing. Calculates the unit cost of a product and adds a given mark-up percentage to determine price.
- Break-even pricing: setting prices such that you are able to break-even with your predicted sales.
- Target profit pricing: setting prices to reach a specified profit goal given your predicted sales.
What is competition-based pricing?
Setting prices based on competition in the industry
WHO sets prices in the industry?
Price leaders tend to set the bar for the rest of the industry. They also set the standard for what is expected from a business in that industry.
Works very well when the productor services offered are _________________ (or close to it), e.g. _______ (product), dry cleaners (service).
homogenous
rice
What does competition based pricing involve?
Competition based pricing involves setting prices based on competitors’ strategies, costs, prices, and market offerings
What are the types of market competition? [4]
- Pure competition
- Monopolistic competition
- Oligopolistic competition
- Pure monopoly
What are the price-competition intensifiers? [4]
- Increasing number of competitors
- Increasing number of substituting offers
- Wider distribution of competitor and or substitution offers
- Increasing surplus capacity in the industry
What are the price-competition inhibitors? [4]
- Non-price related costs of using competing alternatives are high
- Personal relationships are important to the business
- Switching costs are high
- Time and location specificity reduces choice
When can demand for services change?
Demand for services can change when price changes. How it changes is dependent on the elasticity of price for that service.
What are the factors that influence elasticity? [5]
- The availability of substitutes.
- Complementary services.
- Relationship to competitor’s prices.
- Necessities vs Luxuries.
- Time perspective
What are the factors that influence elasticity? [5]
- The availability of substitutes.
- Complementary services.
- Relationship to competitor’s prices.
- Necessities vs Luxuries.
- Time perspective
What is value-based pricing?
Value based pricing uses buyers’ perceptions of value as the key to pricing
What are the four steps in value-based pricing? [4]
Pricing based on customers _______________ of the value a business offers with their product or service. Since perceptions are different for each consumer, measuring _____ value can be difficult.
perceptions
exact
What is perceived customer value equal to?
Perceived customer value = customer benefit – total customer cost
What is good-value pricing?
Good-value pricing: offering just the right combination of quality and good service at a fair price.
What is everyday low pricing (EDLP)?
charging a constant, everyday low price with few price discounts.
What is high-low pricing?
charging higher prices on an everyday basis but with more frequent discounts or promotions.
What is value-added pricing?
Attaching value-added features and services to differentiate a firm’s offers and to support charging higher prices.
What are the types of value-based pricing?
What are the steps in cost-based pricing? [4]
- Design a good product
- Determine product costs
- Set price based on cost
- Convince buyers of product’s value
What is value-based pricing? [4]
- Asses customer needs and value perceptions
- Set target price to match customer perceived value
- Determine costs that can be incurred
- Design product to deliver desired value at target price
