Pricing

Question 1

What is the role of pricing in marketing?

Answer 1

Pricing is how marketing takes value back from the consumer, unlike other marketing activities which are seen as expenses.

Question 2

Why is pricing considered complicated?

Answer 2

Pricing has long-term effects on brand image, competitive positioning, and customer loyalty, drawing on various marketing knowledge.

Question 3

How does supply and demand affect pricing?

Answer 3

As prices increase, demand generally falls, but higher prices can lead to better margins and profitability.

Question 4

What is price elasticity of demand?

Answer 4

Price elasticity of demand measures how sensitive demand is to changes in price, influenced by substitutes, necessity, and brand loyalty.

Question 5

What factors influence customer perceptions of value?

Answer 5

Value is subjective and can vary based on rarity, customization, brand prestige, or customer service.

Question 6

What are reference prices?

Answer 6

Reference prices are price bands that customers consider appropriate or fair, influenced by brand loyalty and past experiences.

Question 7

What is price bundling?

Answer 7

Price bundling involves combining multiple offerings into one discounted price to increase perceived value.

Question 8

What are pricing cues?

Answer 8

Pricing cues, such as sale signs or odd number pricing, influence consumer perception and demand.

Question 9

What are the four basic approaches to pricing?

Answer 9

The four approaches are cost, competitor, value, and demand-oriented pricing.

Question 10

What is a cost-oriented pricing approach?

Answer 10

Cost-oriented pricing focuses on covering costs and setting a minimum price based on breakeven analysis.

Question 11

What is a competitor-oriented pricing approach?

Answer 11

Competitor-oriented pricing sets prices relative to competitors, which can lead to price wars.

Question 12

What is a demand-oriented pricing approach?

Answer 12

Demand-oriented pricing sets prices based on what customers are willing to pay, often used in services.

Question 13

What is value-oriented pricing?

Answer 13

Value-oriented pricing sets prices based on buyers’ perceptions of product attributes rather than costs.

Question 14

What are the four main pricing strategies?

Answer 14

The four strategies are premium pricing, penetration pricing, economy pricing, and price skimming.

Question 15

What is premium pricing?

Answer 15

Premium pricing sets high prices to indicate distinctiveness, often used for luxury goods.

Question 16

What is penetration pricing?

Answer 16

Penetration pricing involves setting low prices to gain market share, often for new products.

Question 17

What is economy pricing?

Answer 17

Economy pricing sets prices at a minimum to attract price-sensitive consumers.

Question 18

What is price skimming?

Answer 18

Price skimming sets high initial prices that are lowered over time to capture different market segments.

Question 19

What situational influences should companies consider when pricing?

Answer 19

Companies should consider internal, competition, socio-legal, and consumption factors.

Question 20

What spheres should companies consider when determining price?

Answer 20

Companies need to consider internal, competition, socio-legal, and consumption spheres.

Question 21

What is the internal sphere in pricing?

Answer 21

The internal sphere involves the role of costs, including average variable costs and the impact of price changes on other products.

Question 22

What is cannibalisation in pricing?

Answer 22

Cannibalisation occurs when customers purchase a different product from the same company due to price changes.

Question 23

How does the competition sphere influence pricing?

Answer 23

The competition sphere examines factors like the number of competitors, their financial strength, cost structures, and market share.

Question 24

What should companies analyze regarding competitors?

Answer 24

Companies should analyze competitors’ positioning strategies and likely reactions to price changes.

Question 25

What are some socio-legal considerations in pricing?

Answer 25

Companies must avoid deceptive pricing, price discrimination, and collusion on prices.

Question 26

What ethical dimensions should organizations consider in pricing?

Answer 26

Organizations should consider offering fair prices to food producers and avoiding misleading practices.

Question 27

What does the consumption sphere focus on?

Answer 27

The consumption sphere focuses on the interactive preference experience, social value, personal meanings, and cultural context.

Question 28

How does the consumption sphere relate to price elasticity?

Answer 28

The consumption sphere helps marketers understand price elasticity as mediated, relativistic, and subject to personal interpretation.