Pricing Flashcards
What is the role of pricing in marketing?
Pricing is how marketing takes value back from the consumer, unlike other marketing activities which are seen as expenses.
Why is pricing considered complicated?
Pricing has long-term effects on brand image, competitive positioning, and customer loyalty, drawing on various marketing knowledge.
How does supply and demand affect pricing?
As prices increase, demand generally falls, but higher prices can lead to better margins and profitability.
What is price elasticity of demand?
Price elasticity of demand measures how sensitive demand is to changes in price, influenced by substitutes, necessity, and brand loyalty.
What factors influence customer perceptions of value?
Value is subjective and can vary based on rarity, customization, brand prestige, or customer service.
What are reference prices?
Reference prices are price bands that customers consider appropriate or fair, influenced by brand loyalty and past experiences.
What is price bundling?
Price bundling involves combining multiple offerings into one discounted price to increase perceived value.
What are pricing cues?
Pricing cues, such as sale signs or odd number pricing, influence consumer perception and demand.
What are the four basic approaches to pricing?
The four approaches are cost, competitor, value, and demand-oriented pricing.
What is a cost-oriented pricing approach?
Cost-oriented pricing focuses on covering costs and setting a minimum price based on breakeven analysis.
What is a competitor-oriented pricing approach?
Competitor-oriented pricing sets prices relative to competitors, which can lead to price wars.
What is a demand-oriented pricing approach?
Demand-oriented pricing sets prices based on what customers are willing to pay, often used in services.
What is value-oriented pricing?
Value-oriented pricing sets prices based on buyers’ perceptions of product attributes rather than costs.
What are the four main pricing strategies?
The four strategies are premium pricing, penetration pricing, economy pricing, and price skimming.
What is premium pricing?
Premium pricing sets high prices to indicate distinctiveness, often used for luxury goods.
What is penetration pricing?
Penetration pricing involves setting low prices to gain market share, often for new products.
What is economy pricing?
Economy pricing sets prices at a minimum to attract price-sensitive consumers.
What is price skimming?
Price skimming sets high initial prices that are lowered over time to capture different market segments.
What situational influences should companies consider when pricing?
Companies should consider internal, competition, socio-legal, and consumption factors.
What spheres should companies consider when determining price?
Companies need to consider internal, competition, socio-legal, and consumption spheres.
What is the internal sphere in pricing?
The internal sphere involves the role of costs, including average variable costs and the impact of price changes on other products.
What is cannibalisation in pricing?
Cannibalisation occurs when customers purchase a different product from the same company due to price changes.
How does the competition sphere influence pricing?
The competition sphere examines factors like the number of competitors, their financial strength, cost structures, and market share.
What should companies analyze regarding competitors?
Companies should analyze competitors’ positioning strategies and likely reactions to price changes.
