Papers Flashcards
Paper 1: pricing strategies: taxonomy and comparison
1) what 2 dimensions can be used to define a taxonomy of price strategies?
1) pricing strategies: a company that decides which prices they are going to set for their product or service to their customers.
COMPANY’S OBJECTIVES: objectives that guide a company into setting their price
- exploit competition positioning
- different prices for different market segments
- balance pricing over product line
CUSTOMERS CHARACTERISTICS
- some have high search cost: they don’t know the company that provides the product so they have to search for it
- some have low reservation price: they are sensitive to a price change
- all have special transaction costs
Paper 1: pricing strategies: taxonomy and comparison
2) Are managers encouraged to use a “skimming versus penetration” approach when designing their pricing strategies for new products?
skimming pricing: where you start with a high price at launch to attract already existing consumers. Here you greater a high profit margin but have fewer sales. Overt time you lower your price to attract new customers.
penetration: where you start with a low price to attract new customer. Therefore you have a lower profit margin, but because you sell more, it compensates each other. Overtime when the demand is bigger, you higher your price.
Managers aren’t encouraged to choose on or the other for their product pricing because it is an oversimplification of pricing strategy. They should on the contractry look at other objectives to set their price such as the consumer value, the cost and the competition
Group 2 – Price bundling strategies
1) What are the two major categories distinguished in Price bundling strategies? Please briefly describe them and their recommended use.
pure bunding - mixed bunding
- pure bunding is where only the bundle is sold, there isn’t a possibility to buy the elements individually.
f.ex office 365 you buy it in it whole, not separate
recommended use: when the marginal cost is neglectable - mixed binding: is where you can buy to bundle or the individual elements. doesn’t necessarily have to be together.
f.ex: Mcdo menu but you can also buy each element separate
recommended use: when the marginal cost is low, but it isn’t zero
Group 2 – Price bundling strategies
2) Prior research indicates that carefully selecting the elements that compose the bundle is highly relevant. How relevant is it to study the consumer segments that may buy the bundle in this context?
It is relevant to study the consumer segments since different segments have a different perception of price but also different reference points. So that takes a roll in the price discrimination.
Therefore measuring is knowing in terms of the price to set for different segments. Proper research is necessary in terms of setting prices for different segments.
Group 3 – Willingness to pay
1) How should we understand the “willingness to pay” (WTP) concept?
WTP: is the maximul price a particular customer is willing to pay for a product or service in exchange for the benefits that are received once consumed the product or service.
It is essentially the value that a person has for a product or service expressed in monetary terms
Group 3 – Willingness to pay
2) What elements can drive consumers to increase their willingness to pay for products?
1) HIGHER CUSTOMER SATISFACTION: this doens’t mean that you can charge a higher price for customers who are more satisfied with your product. However it does mean that customer who are satisfied with you product and had a positive experience are willing to pay more for the product in order to use in again.
Also satisfaction is higher when products or services are customized, so also then a higher WTP.
2) INCREASE IN THE QUALITY GAP BETWEEN PRIVATE AND NATIONAL LABEL
- national label; is a label that charges a higher price and isn’t linked to a store front -> Ben & Jerry
private label: charges lower prices and is linked to a storefront -> Ice cream AH
when the gap increases between the national label and the private labet, the wtp increases since customer are more willing to pay a price premium for the product
3) BRAND IMAGE: a good brand image also increases the price premium that people are willing to pay for a product or service
4) green energy
Group 4 – Participative pricing
1) Pay-what-you-want (PWYW) is a main participative pricing strategy often used nowadays. Please briefly describe it along with their pros and cons.
PWYW is where the buyer is in charge of setting the price, where the seller cannot reject the chosen price by the buyer.
PROS:
+ increase in the demand: which increases the sales volume
+ buyers don’t fully exploit their powers, they are never going to pay 0 euros
+ it can increase profit because buyers will by direct from sellers instead of a intermediate -> Radiohead album sales online
CONS:
- don’t maximize your profit
- control-effort trade off: it is mentally difficult for a buyer to establish a price
- potential of free riders: who will pay a lower price if it happens anamonous and also pay a lower price for big corporate business and higher price for family businesses
Group 4 – Participative pricing
2) Name-your-own-price (NYOP) is another participative pricing strategy often used today. Please briefly describe them it with their pros and cons.
NYOP: is where the seller this time establishes a minimum price. The seller can then name it’s price but it cant’ be below the min price of the seller. Once the buyer gives a price, she had to pay the expressed price. The seller can this time reject a price on the contrary to PWYW.
PROS:
- it’s a way to sell demand uncertainty such as with hotel room and airlines tickets. Where the buyer is willing to change their plans in order to get a lower price
CONS:
- there is a possibility that the paid price is below the WTP, so actually their could have been paid a higher price
Group 5 – Price and promotion interaction and consumer perception
1) What is the difference between price-discounting and value-adding sales promotions?.
price discounting: is where the price of a doog is reduced with a certain amount.
value adding: there price isn’t reduces, it stays the same but a benefit is added to the good. It is harder for the buyer to distinguish the discount that is given
f.ex; Macbook + pair of free Beats headphones
Group 5 – Price and promotion interaction and consumer perception
2) What factors can influence the effectiveness of price promotions?
1) LOW VS HIGH INVOLGEMENT OF THE CUSTOMER
= how important the purchase is for the customer
- High: the purchase is important so with any price reduction they will ask question as to what the reason behind the promotion is
- low: the purchase isn’t that important so they will just accept the promotion as a fact and trust the brand
2) IMMEDIATE VS DELAYED CONSUMPTION: if the good is consumed immediate after purchase or if some time has passed.
- immediate: gives a more positive note to the buyer since they are still in the high of buying the good
- delayed: can decrease the customers excitement for the good
3) BUYERS EMOTIONS:
- positive emotions will have a positive of the price promotion. Positive emotions are provided by nice smells, music, colors,… Consumers with a positive mindset are more likely to byt a product.
- negative emotions can have a negatif effect.
Group 6 – Pricing and culture
1) Concerning price endings, what is the effect of superstitious beliefs on Western cultures compared to Eastern cultures?
Western cultures:
- human > nature
- they believe that supersition can be overcome
- so superstition isn’t taken into account when creating a price ending
Eastern culture:
- human = nature = supernatural
- hindoesm and budhisme
- supernatural elements should be taken into account because they have an effect on the willingness to buy something. They include as much as possible the number 8 because they think that that will give them good fortune
Group 6 – Pricing and culture
2) Cultures can also be classified as high-context or low-context cultures. In the context of Price partitioning (i.e., a practice where a product’s price is cut up into two or more mandatory components), how can culture affect the way prices are interpreted
High-contect culture: culture where a transaction is seen as a relationship that is based on trust. so any kind of hidden prices is seen as a betrayal of trust.
Low-context culture: where a transaction isn’t seen a relationship. pricing techniques are less seen as a deceptive technique.
price partitioning:
- high content: doesn’t really work because they feel it as a betrayes
- low context: does work if the culture is aware of what it entails.
Group 8 – R&D and Marketing
1) What are the advantages of integrating R&D and Marketing? Do all companies need to strive for an integration between R&D and Marketing?
ADVANTAGES: \+ better performance in terms of new product design \+ shorter development process \+ competitive advantage \+ better use of resources
ALL COMPANIES STRIVE FOR INTEGRATION= no
- Not when you are a company with an extensive range of resources
- yes when you are a company with a narrow target group or a small market segment
Group 8 – R&D and Marketing
2) What are the six mechanisms used to integrate R&G and Marketing activities?
RIOPF
1) relocation and physical facilities: the shorter in terms of kilometres the departments are locations, the easier for communication to happen
2) incentives and rewards
3) informal social structure: where both departments communicate with each other
4) organizational structure
5) personnel movement: the option to move from one function to another
6) formal integrate management process
Group 10 – Anti-branding
1) What is the Anti-branding movement? Describe it.
Anti branding movement is a form of activism that can happen online or offline. Its a movement against brand because they can often have negative consequences on society.
Anti branding usually happens with big global brands such as Nestle an coca cola.
The impact that is can be on the value and reputation of the company and it is usually about social and environment concerns.
Examples:
- netslte: We’re in the ’90s, and this is a sad story about poverty, breastfeeding, and greed. Nestle aggressively pushed their breastfeeding formula in less economically developed countries (LEDCs), specifically targeting the poor. They made it seem that their infant formula was almost as good as a mother’s milk, which is highly unethical for several reasons. The first problem was the need for water sanitation. Most of the groups they were targeting – especially in Africa – didn’t have access to clean water (many don’t to this day), so it was necessary for them to boil the water. But due to low literacy rates, many mothers were not aware of this, so they mixed the formula with polluted water which put the children at great risks.
