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MKTG > Price > Flashcards

Price Flashcards

1
Q

Price from a marketing point of view

A

the money or other considerations ( including other products and services) exchanged for ownership or use of a product or service

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2
Q

Price Equation

A

all the factors that increase or decrease the final price of an offering
eg: the price of a semester at uni
List price = published tuition
Incentives/ allowances that may decrease this= scholarships, financial aid
Extra Fees = special activity fees, room and meals, text books, computers etc
All come together as a price equation to get a final price

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3
Q

Value pricing

A

“value” involves the judgement by a consumer of the worth of a product relative to substitute that satisfy the same need
eg: Kohler’s walk in bathtub that is safer for kids and elderly. priced higher than conventional tubs but successful because buyers are willing to pay more for what they perceive as the value for extra safety

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4
Q

Pricing Objective:

Managing for long-run profits

A

Products are priced relatively low compared to their cost to develop, but company expects to make greater profit later due to high market share

Companies sacrifice immediate profit by developing quality products to penetrate competitive markets over the long term.

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5
Q

Pricing objective:

Maximizing current profit

A

over a quarter or a year, allows a firm to quickly set targets and measure performance

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6
Q

Pricing Objective:

Target Return

A

firm sets a profit goal usually determined by its board of directors

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7
Q

Pricing Objective:

Sales

A

Offer very low prices to increase sales and control a specified market share

however sometimes cutting price on one product in a firms line may also reduce sale rev of related products

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8
Q

Pricing objectives:

Market Share

A

ratio of firms sales revenues or unit sales to those of the industry

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9
Q

Pricing objectives:

Unit Volume

A

quantity produced or sold is the objective

can be counterproductive as drastic price cutting to meet volume objective can drive down profit

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10
Q

Pricing Objective:

Social Responsibility

A

a firm may forgo higher profit on sales and follow a pricing objective that recognizes its obligations to customers and society in general

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11
Q

Pricing Constraints:

Consumer Demand

A

the greater the demand for a product, the higher the price can be set

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12
Q

Pricing Constraints:

Costs of Producing and Marketing the product

A

must ensure that firms in their channels of distribution make an adequate profit otherwise the marketer is cut off from its customers

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13
Q

Types of Competitive Market:

Pure Competition

A

Many sellers who follow the market price for identical, commodity products

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14
Q

Types of Competition:

Monopolistic Competition

A

Many sellers who compete on nonprice factors

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15
Q

Types of Competition:

Oligopoly

A

Few sellers who are sensitive to each others prices

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16
Q

Types of Competition:

Pure Monopoly

A

one seller who sets the price for a unique product

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17
Q

Pure competition:

Pricing Product and Advertising strategies available

A

Pricing: almost no competition as market sets the price

Product differentiation: none, products are identical

Advertising: little, purpose is to inform prospects that seller’s product are available

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18
Q

Monopolistic Competition:

Pricing Product and Advertising strategies available

A

Pricing: some comp, compete over range of prices

Product differentiation: some, differentiate products from competitors

Advertising: much, purpose is to differentiate from competitors

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19
Q

Oligopoly:

Pricing Product and Advertising strategies available

A

Pricing: some comp, price leader or follower of competitors

Product differentiation: Various, depends on industry

Advertising: some, purpose is to inform but avoid price competition

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20
Q

Pure Monopoly:

Pricing Product and Advertising strategies available

A

Pricing: no comp, sole seller sets price

Product Differentiation: none, no other products

Advertising: little, purpose is to increase demand for product class

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21
Q

Consumer driven pricing actions

A

consumers are able to compare prices on the internet and make more efficient buying decisions

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22
Q

Seller/ Retailer Driven Pricing Actions

A

aggressive price changes can be made the=rough internet based dynamic pricing in which a seller can change prices in response to competitors instantly

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23
Q

Determining Demand: Demand Curve

A

Shows a maximum number of products consumers will demand at a given price.

24
Q

How can Demand Curve change

A

Shift of demand curve caused by non-price factors. Non-price factors include income, etc

25
Q

Methods of estimating demand curve

A

Buyer surveys, Pricing experiments, Analyze sales data

26
Q

Elastic Demand

A

slight decrease in price = large increase in demand
thus
slight increase in price = relatively large decrease in demand

27
Q

Inelastic Demand

A

slight increases or decreases in price will not significantly affect demand

28
Q

Demand Orientated Pricing Approaches

A

weigh factors underlying expected customer tastes and preferences

29
Q

Prestige Pricing

A

consumers may use price as a measure of quality or prestige
if price is lowered beyond a certain point demand for the item falls
attracts quality or status conscious customers
marketers strategy is to stay above initial price P0

30
Q

Price lining

A

a firm that is selling a line of products may price them at a number of different specific pricing points

31
Q

Odd even pricing

A

setting pricing a few dollars or cents under an even number eg 499.99, 11.99 etc
theory that decresing price from 500 to 499 increases demand as consumers see something that is over $400 rather than around $500

32
Q

Target Pricing

A

Estimating the price the ultimate consumer would be willing to pay for a product then working backwards through mark ups by retailers and wholesalers to determine a price they can charge the wholesalers

33
Q

Bundle Pricing

A

based on the idea that customers value the package over the individual products
market two or more items in a single package price
eg: Mcvalue meal at McD’s

34
Q

Yield Management Pricing

A

charging different prices to maximise revenue for a set capacity
service firms engage in this, vary prices by time, day, week or season
eg airline tickets and seats

35
Q

Cost orientated approaches

A

a price setter stresses the cost side of the pricing problem not the demand side.

price is set by looking at the production and marketing costs and then adding enough to cover direct expenses, overhead and profit

36
Q

Standard Marking Up

A 
adding a fixed percentage to the cost of all items in a product class
used by supermarkets or retailers with a large number of products
37
Q

Cost plus pricing

A

involves summing the total unit cost of providing a product or service and adding a specific amount to the cost to arrive at the price

38
Q

Experience curve pricing

A

based on the learning effect in which the unit cost of many products and services declines by 10 - 30 % each time a firms experience in producing and selling them doubles
can be mathematically estimated as it is predictable enough
Eg: fax machines have decreased from $1k to less than $100

39
Q

Profit Orientated Pricing Approaches

A

used to balance both revenues and costs

involves setting a target of a specific dollar volume or profit

40
Q

Target Profit Pricing

A

firm sets an annual target of a specific volume of profit

needs to make assumptions on variable costs, fixed costs, demand, annual volume of units

41
Q

Target Return on Sales pricing

A

used by firms such as supermarkets to set typical prices that will give them a profit that is a specified % of the sales volume

42
Q

Target return on investment pricing

A

a method of setting prices to achieve an annual return on investment target. usually used by large, publicly owned corporations and public utilities

43
Q

Competition Orientated pricing approaches

A

price setter stresses what competitors or the market are doing

44
Q

Customary Pricing

A

used for products where distribution, or other competitive factors dictate the price
a significant departure from the customary price can result in loss of sales for the manufacturer
ways around it include what Hersheys did where they changed the amount of chocolate in its bar rather than its retail price.

45
Q

Above, At or below market pricing

A

use market benchmark then deliberately choose a strategy of above, at or below
Eg Rolex takes pride in emphasizing that it makes one of the most expensive watches you can buy

46
Q

Loss leader pricing

A

for special promo, retail stores deliberately sell a product below its customary price to attract attention to it
purpose is not to increase sales but to attract customers in the hope they will buy other products as well, particularly the discretionary items with large mark ups

47
Q

Six steps in price setting

A
  1. Identify pricing objectives and constraints
  2. Estimate demand and revenue
  3. Determine cost, volume and profit relationships
  4. Select an appropriate price level
  5. Set list or quoted price
  6. Make special adjustments to list or quoted price
48
Q

Industrial distributor

A

performs a variety of functions including selling, stocking delivering a full product assortment and financing

49
Q

Form of Ownership

A

independent retailer, corporate chain and contractual systems

50
Q

Independent retailer

A

independent business owned by an individual
simple for the retailer : owner is the boss
For customers it can offer convenience, personal service and lifestyle compatibility

51
Q

Corporate Chain

A

multiple outlets under common ownership
large chain can bargain with manufacturer for good, service of volume discounts
consumer benefits as there are multiple chains and consistent management policies

52
Q

Contractual Systems

A

independently owned stores that band together to act like a chain
members can take advantage of volume discounts and may be more favorable to consumers

53
Q

Level of Service

A

Self: customers perform many functions during purchase prosess eg self check in airports

Limited: provide some services such as credit or merchandise return but customers are responsible for most shopping activities

Full: include most specialty stores provide many services to customers

54
Q

Depth of product line

A

store carries a large assortment of each item such as shoe store which offers running shoes, dress shoes, kids shoes etc

55
Q

Breadth of Product line

A

variety of items a store carries such as appliances and books

MKTG (6 decks)

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