Four P's: Price Flashcards
A specification of what a seller requires in exchange for transferring ownership or use of a product or service
Price
Extent to which goods and services are perceived by a customer as meeting his or her wants measured by customer willingness to pay
-Subjective
Value
Wholesale price/ COGS
1. Difference between merchandise cost and selling price
2. Reduction of selling price below the original selling price
- Mark up
- Markdown
What is the sales revenue equation and what is it reliant on?
Sales revenue = quantity sold x price per unit
-It is reliant on the laws of supply and demand
What are the basic considerations for pricing?
-Economics of pricing (supply and demand)
-Nature of merchandise and services
-Competition
-Business conditions
-Market analysis
-Distribution method
Consumer will demand
1. When there is less of a good or service and it is more expensive, demand is ___
2. When there is more of a good or service and it is less expensive. demand is ___
Law of demand
1. top left of general demand curve
2. bottom right of general demand curve
Sellers will supply
1. Less of a good or service when it is more expensive
2. More of a good or service when it is less expensive
Law of supply
1. bottom left of general supply curve
2. top right of general supply curve
What are the factors impacting supply and demand?
-Consumer preference: geography and culture
-Value: cost/ reward payoff, substitutes
-Financials: margin. wholesale/ COGS
-Industry
-Resource availability
-Interest
How strongly a change in price affects the quantity demanded
1. ___: Demand fluctuates significantly when there is a change in price
2. ___: Demand does not change significantly when there is a change in price
Elasticity of demand
1. Elastic
2. Inelastic
At what point will revenues exceed fixed and variable costs
-Helps determine how prices are set
-Revenues = fixed costs + variable costs
Break even point
What are some factors that influence pricing?
-Market fluctuation
-Types of merchandise/ services
-Market strategies
-Purchasing practice
-Perceived values
-Target market
-Competition price
-Regulation
When competition is nearby, how does it affect the pricing model of the business
Competition pricing
A pricing strategy that uses a particular competitor as a model in setting prices
Follow the leader pricing
What are some regulations affecting pricing?
-Biohazard disposal
-OSHA requirements
-Utility company policy
-Inflation
-Minimum wage
Pricing strategy:
Sets lower than normal prices to hasten market acceptance of a product/ service. or to increase market share
Penetration pricing
Pricing strategy:
Sets very high prices for a limited period before reducing them to more competitive levels
Price skimming
Pricing strategy:
Sets more than one price to offer price concessions to certain customers
-Periodic discounting
-Random discounting
-Negotiated pricing
Variable pricing
Pricing strategy:
One price for primary target market, separate price for secondary target market
-Another type of discounting
-FTC exceptions (government organizations, infants, religious orders)
-Loophole: same company in different areas
Secondary market pricing
Pricing strategy:
Sets a range of several distinct merchandise price levels
Price lining
Pricing strategy:
Different prices on a range of product/ services to reflect the benefits to the customer of part of the range
Product price lining
Pricing strategy:
Less expensive item being physically positioned next to more expensive items
Reference pricing
Pricing strategy:
Psychological pricing strategy
Odd number pricing
Pricing strategy:
Single price for 2 or more units
Multiple unit pricing
Pricing strategy:
Packaging two or more products together
Bundle pricing
