Lecture 10 - Price strategies

Question 1

What is price in marketing?

Answer 1

Price is the amount paid for a product or service and the only element of the marketing mix that generates revenue.

Question 2

What is reference price?

Answer 2

Reference price is the price consumers expect to pay for a product, based on their previous experiences or competitor’s prices. It helps them evaluate whether a current price is fair, too high, or a good deal.

Question 3

What factors make customers less price-sensitive?

Answer 3

Few substitutes or competitors.
High product differentiation.
Low visibility of the price increase.
Habitual purchases.
Perception of higher value or quality.

Question 4

What are the six steps in setting a price?

Answer 4

Selecting the pricing objective.
Determining demand.
Estimating costs.
Analyzing competitors’ costs, prices, and offers.
Selecting a pricing method.
Selecting the final price

Question 5

What are common pricing objectives?

Answer 5

Maximizing profit or revenue.
Gaining market share.
Establishing premium positioning.

Question 6

What is differentiated pricing? (price adaption strategy)

Answer 6

Differentiated pricing (price discrimination) involves charging different prices for the same product or service based on factors like:

Customer segments (e.g., student discounts).
Product form (e.g., premium vs. standard versions).
Location (e.g., geographic pricing).
Time (e.g., peak vs. off-peak pricing).

Question 7

What is promotional pricing? (price adaption strategy)

Answer 7

Promotional pricing is the temporary reduction of prices to stimulate demand, including:

Loss-leader pricing: Selling a product at a very low price to attract customers who may buy other items.
Special event pricing: Offering discounts during specific events or holidays.
Cash rebates: Returning part of the purchase price to customers after they buy.
Psychological discounting: Creating the impression of a deal by showing a higher original price.

Question 8

How should a company respond to competitors’ price changes?

Answer 8

Analyze the reason for the price change.
Evaluate the impact on market share and profitability.
Respond by improving value, matching prices, or differentiating the product.

Question 9

What is psychological pricing?

Answer 9

Psychological pricing leverages how customers perceive prices, e.g.:

Ending prices with “9” to signal a deal.
Using round numbers to convey premium quality.

Question 10

What are alternatives to raising prices?

Answer 10

Reduce the product size or quantity.
Use less expensive materials.
Remove or reduce product features.
Offer simpler packaging.

Question 11

Geographical pricing (price adaption strategy)

Answer 11

Different prices to customers in different locations and countries