MKTG 201 (week 6) Flashcards
What are the four types of pricing objectives?
- Profit Oriented
- Sales Oriented
- Competitor Oriented
- Customer Oriented
Profit Oriented
Profit maximization; doesn’t consider customers value
Sales Oriented
focused on increasing sales (unit, dollar, market share); overall market share
Competitor Oriented
measuring themselves against competitors
Customer Oriented
focus on customer value by matching prices to customer expectations; pricing used to communicate value
Competitive parity pricing
setting similar $ to competitors
Status Quo Pricing
changing $ only to meet competitors
Demand Curve
How much customers will buy at different prices (assuming everything else remains same)
What is the typical relationship between quantity and price?
Demand increases as price decreases
Price Elasticity
customers sensitive to price changes in terms of quantities they will buy
- Small % changes in $$= large % changes in units bought
Price Inelasticity
- Insensitive
- large % changes in $$= small % changes
How does brand loyalty impact price elasticity? When you are brand loyal are you more or less sensitive to price increases?
- Less price sensitive
- Easier to lose customers with price increase than gain customers with price decrease
- Easier to lose customers with price increase than gain customers with price decrease
How does having substitute products available impact price elasticity?
Increases price sensitivity
What is Break Even Analysis? What does it tell you?
of units sold generates enough revenue to equal total costs;
Revenue = Price x Units Sold
At the Break Even Point, what are the firm’s profits?
BEP, profits=0
What is the difference between variable and fixed costs?
Variable Cost: costs that vary with production volume (labor and materials)
Fixed Cost: costs that remain the same regardless of volume (rent, utilities, insurance, equipment)
In a Break-Even Analysis, the lowest amount of cost you can possibly have is equal to which type of costs (fixed or variable)?
Lowest cost possible fixed cost
What are the four types of competition/market structure? How do they influence pricing?
Monopolistic Competition:
Pure Competition:
Monopoly:
Oligopoly:
Monopolistic Competition:
MANY firms that sell closely related products; many firms, less $ competition
Pure Competition:
different companies sell commodity products that are non-substitutable to consumers (rice, potatoes, etc.), Many firms, More $ competition
Monopoly:
ONE firm dominates market; Few firms, less $ competition
Oligopoly:
FEW firms dominate market, More $ competition
What is Cost-Plus pricing?
adding fixed % markup to the cost; inefficient
High-Low Pricing
Every Day Low Pricing
continuity of prices (nonsale to discount prices); reducing consumer search costs
What is the difference between a market penetration strategy for pricing new products?
Penetration pricing: product introduced then set low initial price (goal to quickly build sales, market value, and profits
- Rapid growth in sales volume can quickly decrease production costs
Price Skimming:
product introduced, then set initial price (goal “skimming” revenue layers from market)
