M4: Pricing Concept Flashcards
What is Pricing Concept?
Pricing: process of fixing the value a manufacturer receives in the exchange of service and goods
Pricing method: adjustment of the cost of product offerings to be suitable to manufacturer and customer
What are the two new product pricing strategies?
Market Skimming: high to low price to skim maximum revenues per each segment (used when: well known brand seller, no competition, innovative product, high number of potential customers)
Market Penetration: low to high price to attract large number of buyers and large market share (used by startups, brands unwilling to take high level of risks, identifying the size of the potential market for their product)
What are the four introductory marketing strategies?
High Promotion and High Price - Rapid-skimming strategy
Low Promotion and High Price - Slow-skimming strategy
High Promotion and Low Price - Rapid-penetration strategy
Low Promotion and Low Price - Slow-penetration strategy
What are the various Product Mix Pricing Strategies?
- Product Line Pricing: pricing different products within the same product range at different price points
(ex. iPhone 14 and iPhone 15) - Optional Product Pricing: pricing for optional or accessory products with the main product
(ex. Car + Wheel Mags, iPhone + Charger) - Captive-Product Pricing: Pricing products that must be used with the main product; main product cannot be used without these.
(ex. Shaves + Razor, Printer + Paper, Film Camera + Film Paper) - By-Product Pricing: products with little or no value produced as a result of main product
(ex. Chicken produces Feathers which are sold to mattress and pillow makers, Orange juice creates orange peels, Corn makes corn stalks and husks)
- Product Bundle Pricing: Sellers combine several products and offer the bundle at a reduced price (ex. Happy Meal and Grocery Christmas Bundles)
Pricing Formula
Selling Price = Markup + Cost Price
Markup = Selling Price - Cost Price
