Price Mix Flashcards
communicates the intended value positioning of a product or brand to the market.
price
is the element of the marketing mix that produces revenue, and the easiest to adjust
price
highest amount that a retailer may charger to a consumer for a medicine placed under price regulation
Maximum Drug Retail Price (MDRP)
No medicine under price regulation shall be sold to a customer at a price higher than the MDRP
Under RA 9502
Enabling laws of RA9502
EO 821 and EO 155
On top of the MDRP ________ and _______ are still eligible to avail of special discounts
Senior citizens and PWDs (20%)
Violation penalty under RA 9502
Php 50,000 to Php 5,000,000
In 2009, EO 821 mandated the price reduction of 5 important molecules
- amlodipine
- atorvastatin
- azithromycin
- cytarabine
- doxorubicin
first line for diseases
When was the EO repealed for MDRP to have a new set of medicines
2021
Innovator brand of amlodipine
Norvasc (MDRP by law)
Criteria for determining MDRP include:
- Public health priorities
- High price differentials compared to international prices
- Limited competition or lack of generic counterparts
- Expensive and commonly prescribed drugs
Drug products that were price-controlled can also be removed by the govt. from having MDRP (t or f)
T
3 General pricing concepts
- Reference prices
- Price-quality inferences
- Price Endings
Comparing an observed price to an internal reference price they remember or an external frame of reference such as a posted “regular retail price”
Reference prices
Types of Reference Prices
- Fair Price
- Typical Price
- Upper-bound price
- Lower-bound price
Price based on customer’s feelings
Fair price
usual price of a product in the market (SRP)
Typical price
Maximum price that consumers would pay; also called reservation price (konting taas sa SRP)
Upper-bound price
Minimum price that consumers would pay; also called lower threshold price
Lower-bound price
Is a concept where price is used as an indicator of a product’s quality; higher price = higher quality
Price-quality inference
Pricing concept based on consumer psychology where price is determined based on the numerical structure of a product’s price
Price endings
Example of price endings
- Odd number pricing
- “9” endings pricing
- 0 and 5 endings
Limitations of price endings pricing
- only useful when consumer price knowledge is poor
- not usually effective for items that are not bought frequently
- not usually effective if product design changes frequently
Steps in setting a product’s price
- Selecting the Pricing Objective
- Determining demand
- Estimating costs
- Analyzing competitor’s costs, prices, and offers
- selecting a pricing method
- selecting the final price
The company first decides where it wants to positions its market offering.
Selecting the Pricing Objective
5 Pricing Objectives
- Survival
- Maximum current profit
- Maximum market share
- market skimming
- product-quality leadership
intense competition, changing market wants, overcapacity
Survival
maximum profit based on demand and cost estimation
Maximum current profit
setting a lower price to capture/penetrate most of the market
Maximum market share
price starts very high and goes down slowly over time
market skimming
best-in class quality products can set highest price (Ex. innovator drug brands often set the highest price)
Product quality leadership
Price and demand normally has an ______ relationship
Inverse
Pertains to the reaction of a market changes in price. If a product price increases and demand goes down, it means the market is price sensitive
Price sensitivity
Sets the maximum (ceiling price)
Demand
sets the minimum (floor price)
Costs
also called as overhead are costs that remain constant in producing a product (rent, salary)
Fixed costs
are costs that change depending on production output (raw material and packaging material costs, electricity)
variable costs
Price should cover either fixed or variable cost to make price effective (t or f)
F - cover both fixed and variable cost
4 general methods in pricing
- markup pricing
- target-return pricing
- perceived-value pricing
- value pricing
a company puts a markup above the production cost (unit cost) to determine the price of the product
Markup Pricing
Most popular pricing method
Markup pricing
the amount added to the cost it took to make the product and is the source of a company’s profit
markup
the company decides on the price that would give back the target rate of return on the investment
target-return pricing
delivers its promised features and values and the customers perceive the value which justifies the price
perceived-value pricing
- where a company optimizes its production system so well that it can produce a product so efficiently that it can offer it at a very low price (while high quality is maintained)
- made by innnovators
value pricing
Price adaptation strategies
- geographical pricing
- price discounts (trade)
- promotional pricing
- differentiated pricing
the company decides how to price its products to different customers in different locations and countries
geographical pricing
different price discounts
- discount
- quantity discount
- functional discount
- seasonal discount
a price reduction for buyers who pay promptly
discount
2% discount is given if a drugstore pays its orders within 30 days to the distributor)
discount
price reduction for buyers who buy more (large volumes)
quantity discounts
also called trade discount; offered to a buyer (drugstore) that also performs specific functions
functional discount
a price reduction given for products that are outside peak season
seasonal discounts
Different types of promotional pricing
- loss leader pricing
- special customer pricing
- psychological pricing
offering a well-known brand at a cheaper price during to stimulate customer traffic
loss-leader pricing
offering special prices to “club” members
special customer pricing
offering a usually high-priced product at a very low price (usually done for near-expired products that are still within acceptable shelf life)
psychological pricing
price adjustment to accommodate differences in products, customers, and locations
differentiated pricing
occurs when a company sells a product or service at a two or more prices that do not reflect a proportional difference in costs
price discrimination
Different types of price discrimination
- customer-segment pricing
- product form pricing
- channel pricing
offering the same product but at difference prices to different customer segment
customer-segment pricing
offering same product at different prices as different forms
product form pricing
offering the same product at different price based on location
channel pricing
