Price (Marketing Mix) Flashcards
what is the definition for pricing? Cite a source.
Price is the amount the customer has to pay or exchange to receive an offering (Baines et al., 2021).
What is pricing objective?
A guide/criteria that marketers use to decide how to price their product/service.
Identify and describe 4 types of pricing objectives, and an example for each.
- Demand: prices based on sensitivity and demand.
An example of this would be seasonal (on/off season) prices, as demand increases during seasonal holidays, leading to price increase. - Cost: prices are set depending on how much they cost to make.
An example of this would be Lidl or Aldi, when they place the lowest prices possible. - Competitor: prices are set depending on competitors’ prices.
An example of this would be Apple and Samsung, which have similar prices to rival each other with similar pricing. - Value: prices ae set depending on what customers believe product/service offers.
An example of this would be when people choose to order from specialised smaller cafes rather than mainstream coffee shops like Starbucks, as they believe the price conveys the quality of the coffee.
For normal products, when their prices are lowered, demand increases. Whereas, for luxury goods, when their prices are raised, demand increases. Why is this the case? Cite studies.
Luxury products are seen as status symbols:
Forbes (2022)
- stated that consumers know that it does not always mean ‘high quality’ or sustainability.
- higher prices mean bigger flex.
What is the ‘price elasticity of demand’?
Price elasticity is how demand changes when there is a change in price.
Define ‘fixed’ and ‘variable’ costs and provide an example of each.
- Fixed costs: costs that are consistently the same and do not change.
An example of this would be rent. - Variable costs: costs that are subject to change depending on the organisation’s cost of production for that service/good.
An example of this would be raw materials or labour.
List 4 types of pricing strategies and an example for each.
Price skimming: where the price is set really high in the beginning, but is gradually lowered over time.
An example of this would be iPhones, where models decrease in price when a new launch is released.
Penetration pricing: where the price is set low compared to competition to attract customers.
An example of this would be Netflix when they had rivalled against Blockbuster and placed their prices lower than Blockbuster whilst offering similar service.
Premium pricing: when prices are set to high purposely to suggest quality and luxury in their product/service.
An example of this would be Gucci, a highly respected brand known for its’ high prices and luxurious items.
Economy pricing: when prices are set at the lowest amount possible to attract those who are constantly trying to save money.
An example of this would be Aldi, where products are always at their all-time-low price.
How might psychology be used by marketers in pricing decision?
- Pricing products under £xyz.99 can perceive the image that it is under a unit.
An example of this would be pricing products at £9.99, making it appear cheaper than £10, when really, it is the same. - Price anchoring: when multiple levels of that product/service is introduced for consumers to choose which is the ‘better’ deal.
An example of this would be cinema popcorn, sizes differing from small to large. This causes customers to analyse the price difference and go for the ‘deal’ they think is the most worth.
List B2B pricing, and an example for each.
Geographical pricing: prices are based on customer location.
An example of this would be pharmacies selling medicines at different prices in different countries.
Negotiated pricing: prices set according to specific agreements between a company and its clients or customers.
An example of this would be buying a house, when negotiating for a price.
Discount pricing: companies reduce the price on the basis that a customer commits to buying a large volume of that offering now or in the future, or is prepared to pay for it quickly.
An example of this would be buying stocks of product from a supplier.
Relationship pricing: based on understanding needs and pricing the product or service according to those needs to generate a long term relationship.
An example would be similar to the discount pricing.
Transfer pricing: large organisations where there is internal dealing between different divisions of the same company and across national boundaries.
What are the different price elasticities?
- elasticity means changes in the price lead to changes in demand.
- inelasticity means changes in the price leads to no changes in demand.
What are digital pricing strategies? (used by online marketers).
- Purchase price.
- Rental or subscription.
- Freemium.
- pay-per-use.
What are some cons to purchase price as a pricing model for online businesses?
- Price transparency
- Customer knowledge increases
- Piracy issues
However, 89% of purchasers purchase books from the first site they see.
Only 10% of shoppers are bargain hunters.
Why is price the most important P?
The only one that generates profit.
