Lecture 10 Price Flashcards
Define price
The amount of money charged for a product or service, or the sum of all the values that customers exchange for the benefits of having or using the product or service
What happens at a price floor?
There are no profits below this price
What is the price floor based on?
Product costs
What happens at a price ceiling?
There is no demand above this price
What is the price ceiling based on?
Consumer perceptions of value
What other factors can influence price?
Competition and other external factors such as:
- competitors’ strategies and prices
- marketing strategy, objectives and mix
- nature of the market and demand
What does value-based driving use the perception’s of?
This uses the buyers’ perception of value rather than the seller’s cost
How is value-based pricing driven?
Value-based pricing is customer driven
How is cost-based pricing driven?
Cost-based pricing is product driven
In value-based pricing what is the price set to match?
Price is set to match perceived value
What are the stages in cost based pricing?
Design a good product
Determine product costs
Set price based on cost
Convince buyers of product’s value
What are the stages in value based pricing?
Assess customer needs and value perceptions
Set target price to match customer-perceived value
Determine costs that can be incurred
Design a product to deliver desired value at target price
What are the 4 main customer value-based pricing strategies?
Good-value pricing
Everyday low pricing (EDLP)
High-low pricing
Value-added pricing
What is good-value pricing?
Offering just the right combination of quality and good service at a fair price
What is EDLP?
This involves charging a constant everyday low price with few or no temporary discounts