Consumer Psychology and Pricing Flashcards
The study of how people think feel behave when making a purchase
Consumer Psychology
Comparing an observed price to an internal reference price they remember or to an external frame of reference such as a posted regular retail price
Reference Prices
Many consumers use price as an indicator of quality
Price-quality inferences
Many sellers believe prices should end in odd numbers
Price Endings
Enumerate the steps in setting pricing policy
- Selecting the Pricing Objective
- Determining Demand
- Estimating Costs
- Analyzing Competitor’s Cost, Price and Offers
- Selecting a Pricing Method
- Selecting the Final Price
Some companies want to maximize their market share they set the lowest price assuming the market is price sensitive
Maximize Market Share
Company is unveiling a new technology favor setting high prices to maximize market skimming
Maximize Market Skimming
A company might aim to be the product quality leader in the market many brands try to be affordable luxuries products or services characterized by high levels of perceived quality taste and status with the price just high enough not to be out of consumers reach
Product-Quality Leadership
Explores how many units consumers would buy at different proposed prices although there is always the chance they might understate their purchase intentions at higher prices to discourage the company from setting higher prices
Surveys
Varies the prices of different products in a store or charge different prices for the same product in similar territories to see how the change affects sales
Price experiments
Marketers need to know how responsive or elastic demand would be to a change in price
Price elasticity of demand
Adding a standard markup to the product’s cost
Markup Pricing
The firm determines the price that would yield its target rate of return on investment
Target Return Pricing
Made up of several elements such as the buyers image of the product performance the channel deliverables the warranty quality customer support and software attributes such as the suppliers reputation trustworthiness and esteem
Perceived-Value Pricing
Charging a fairly low price for a high quality offering
Value Pricing
The firm bases its price largely on competitors prices charging the same more or less than major competitors
Going-Rate Pricing
Enumerate the price adaptation strategies
- Geographical Pricing
- Price Discounts and Allowances
- Promotional Pricing
- Differentiated Pricing
The company decides how to price its product to different customers in other locations and countries
Geographical Pricing
The buyer and seller directly exchange goods with no money and no third party involved
Barter
The seller receives some percentage of the payment in cash and the rest in products
Compensation Deal
The seller sells a plant equipment or technology to another country and agrees to accept as partial payment products manufactured with the supplied equipment
Buyback Arrangement
The seller receives full payment in cash but agrees to spend a substantial amount of the money in that country within a stated time period
Offset
A price reduction to buyers who pay bills promptly
Discount
A price reduction to those who buy large volume
Quantity Discount
Offered by manufacturer to trade channel members if they will perform certain functions such as selling storing and record keeping
Functional Discount
A price reduction to those who buy merchandise or services out of season
Seasonal Discount
An extra payment designed to gain reseller participation in several programs
Allowance
Most companies will adjust their least price and give discounts and allowances for early payment volume purchases and off season buying
Price Discounts and Allowances
Strategies are often a zero sum game
Promotional Pricing
Companies often adjust their basic price to accommodate differences in customers product location etc
Differentiated Pricing
Occurs when a company sells a product or service at two or more prices that do not reflect a proportional difference in cost
Price Discrimination
The seller charges separate price to each customer depending on the intensity of his or her demand
First Degree Price Discrimination
The seller charges less to buyers who buy a large volume
Second Degree Price Discrimination
The seller charges different amounts to different classes of buyers
Third Degree Price Discrimination
Different customer groups pay different prices for the same product or service
Customer Segment Pricing
Different versions of the products are price differently but not proportionately to their cost
Product Form Pricing
Some companies price the same product at two different levels based on image differences
Image Pricing
The use of distribution channels is a factor in pricing it is common for firms to offer different prices depending on where you buy an item
Channel Pricing
The same product is price differently at different locations even though the cost of offering it at each location is the same
Location Pricing
Prices are varied by season day or hour
Time Pricing
The ratio of what customers receive to what they have to pay for it
Value
Use as a set of algorithms that analyze past and current merchandise sales and prices estimator relationship between prices and sales regenerated and then determine the optimal initial price for the merchandise and appropriate size and timing of markdowns
Merchandising Optimization Software
The practice of offering two or more different products or services for sale at one price
Practice Bundling
The practice of charging different prices in different stores markets region or zone
Zone Pricing
Sale of an important product at the price lower than that normally charged in a domestic market or country of origin
Dumping
Representatives of two or more companies secretly set similar prices for their products
Price fixing
Occurs when a manufacturer conspires with wholesalers or retailers to ensure certain retail prices are maintained
Vertical Price Fixing
Property but and sold by operating units or divisions of a company doing business with an affiliate in another jurisdiction
Transfer Pricing
Occurs when payment is made in some form other than money
Countertrade
