Price

Question 1

Price

Answer 1

• Sum of all costs customer gives up to gain the benefits of having or using a product or service
• Product , promotion, place are all costs to business
• Pricing is the revenue

Question 2

what is the most dynamic of the 4 Ps

Answer 2

Price as can change easily

Question 3

3 pricing strategies

Answer 3

customer value based pricing
cost based pricing
competitor based pricing

Question 4

customer value based pricing

Answer 4

Value added pricing
* Value based on features and services
* Ex: Tiffany or Lexus

Good value
* Everyday low pricing
* High low price
o Frequent promo

Advantages
 Don’t leave money on the table
 Get surplus

Disadvantages
 Measurement

Question 5

cost based pricing

Answer 5

Cost-plus/markup pricing
 20% increase

Breakeven
 over where we breakeven
* Need to know elasticity

Advan
 Easy to measure

Disadvantage
 Ignores demand

Question 6

competitor based pricing

Answer 6

Based on competitors strategies, price, costs, and market position
o Undercut competitors price
o Price yourself above competitors

Question 7

elastic vs inelastic

Answer 7

• Highly elastic = price sensitive |E| >1
• Highly inelastic = demand barely changes with price 0< |E| <1

ex - -1.6% (high) means for 1% increase in price = 1.6% decrease in sales

Question 8

buyers are more inelastic when product is

Answer 8

o Unique
o Higher quality or prestige
o Necessity
o Low in cost relative to consumers income
o When customers are brand loyal

Question 9

influences in elaticity

Answer 9

Elasticity can vary by consumer
o Ex: cigarette to teen vs adults

Elasticity can vary by time frame
o In short term gas is inelastic in long-term it is elastics

Question 10

New product pricing strategies

Answer 10

market skimming (price skimming)
market penetration pricing

Question 11

Market skimming

Answer 11

a. High initial price
b. Reduce price after innovators/ early adopters pay more
c. Ex 599 then 1 month later 399

Requirements
i. Product quality must support high initial price
ii. Not easy to copy

Advan
i. Gain insights into what consumers are willing to pay
ii. Max ROI
iii. Communicates prestige

Dis
i. Slower build to market share
ii. Can anger early adopters
iii. Only works if our demand curve inelastic

Question 12

market penetration pricing

Answer 12

a. Set low initial price and rapidly gain market share

Requirements
i. Market needs to be high elastic (price sensitive)

Adv
i. Rapidly builds market share

Dis
i. Requires large initial investment
ii. High risk