price

Question 1

price

Answer 1

 “The amount of money charged for a product or service, or the sum of values consumers exchange for the benefits of having or using the product or service”

Question 2

what price can do

Answer 2

 Positioning
– Perception of quality
 Gain market position – Sell more units
 Manage demand
– Increase or decrease
 Achieve financial objectives – Profit, cash flow, share
price
 Manage competition
– Discourage entry or defeat them

Question 3

influences on price

Answer 3

• company factors, positioning and cost
• customer perceptions
• the competition
• legal and ethical

Question 4

determining price

1. company factors

Answer 4

 Positioning
– The overall marketing mix should reflect the desired
positioning
– Price is only one component of the mix, and must be consistent with the other components
 Costs set the price floor  Fixed costs
– Do not vary with quantity produced or sold
– Larger quantities will mean each unit will then carry a lower share of the fixed costs
 Variable costs
– Vary directly with the level of production
 Total costs
– Sum of fixed and variable, for any given quantity

Question 5

determining price

2. customer factors

Answer 5

Customer perceptions

• Perceived consistency of positioning
• Perception of value
• Elasticity of demand
• Price sensitivity

Question 6

Factors that affect price sensitivity

Answer 6

 The perceived importance or necessity of the product to the consumer
 The availability of substitutes
 The perceived quality, prestige or exclusiveness of the
product
 The proportion of the expenditure on the product relative to income
 A proportion of the cost is borne by another party
 The product is used in conjunction with previously purchased assets
MKF1120 - Marketing Theory and Practice 22

Question 7

determining price

3. competition

Answer 7

-pure competition
the market consists pf many buyers and sellers in a uniform community
-monopolistic competition
the market consists of buyers and sellers who trade over a range of prices. seller can differentiate their offer to buyers
-oligopolistic competition
the market consists of a few sellers who are highly sensitive to each others pricing and market strategies uniform or non uniform
-pure monopoly
the market consists of one seller. the seller may be government

Question 8

determining price

4. legal and ethical

Answer 8

The ACCC: Competition and Consumer Act (2010)
– Price Fixing
– Price Discrimination
-Deceptive pricing
– Pricing confusion