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Marketing > Pricing > Flashcards

Pricing Flashcards

1
Q

What is the primary role of pricing in marketing?

A

To generate revenue and communicate value to customers.

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2
Q

Why is pricing often considered the most flexible marketing mix element?

A

Because it can be changed quickly to respond to market conditions. Example: Airlines frequently adjust ticket prices based on demand, seasonality, and competition (e.g., Ryanair, Delta).

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3
Q

What is cost-plus pricing?

A

Adding a standard markup to the cost of the product. Example: Supermarkets like Tesco and Carrefour use cost-plus pricing for private-label goods.

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4
Q

What does break-even pricing determine?

A

The price at which total revenues equal total costs, resulting in no profit or loss. Example: Startups like Peloton use break-even analysis to set subscription fees for hardware financing.

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5
Q

What is ‘price matching’?

A

Setting prices at the same level as competitors. Example: Amazon and Walmart frequently adjust prices to match competitors in online retail.

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6
Q

What is cost-plus pricing?

A

Adding a standard markup to the cost of the product.

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7
Q

Why is full-cost pricing beneficial for organizations?

A

It ensures all costs, both fixed and variable, are covered in the price.

Supermarkets like Tesco and Carrefour use cost-plus pricing for private-label goods.

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8
Q

What does break-even pricing determine?

A

The price at which total revenues equal total costs, resulting in no profit or loss.

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9
Q

How does break-even volume impact pricing strategies?

A

It helps firms assess whether expected sales volumes will cover costs at a given price.

Startups like Peloton initially use break-even analysis to set subscription fees for hardware financing.

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10
Q

What is ‘price matching’?

A

Setting prices at the same level as competitors.

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11
Q

What industry often uses competitive bidding?

A

Construction and government contracts.

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12
Q

What does market-led pricing focus on?

A

Customer demand and perceived value.

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13
Q

Why is perceived value pricing effective?

A

It allows firms to charge premium prices based on the customer’s view of the product’s worth.

Apple uses market-led pricing for its iPhones, emphasizing premium design and user experience.

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14
Q

What is the goal of a ‘build’ pricing strategy?

A

To increase market share by setting low prices.

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15
Q

How does a ‘hold’ pricing strategy differ from ‘build’?

A

It focuses on maintaining current market share and profit levels.

Netflix employed a ‘build’ strategy with low subscription costs to dominate the streaming market initially.

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16
Q

What industries commonly use dynamic pricing?

A

Airlines, hotels, and e-commerce platforms.

17
Q

How does technology enable dynamic pricing?

A

By using algorithms to adjust prices in real time based on demand and supply.

Uber uses dynamic pricing to charge more during peak hours or high demand.

18
Q

What is price elasticity of demand?

A

The degree to which demand changes in response to price changes.

19
Q

When is demand considered elastic?

A

When a small price change causes a significant change in demand.

Starbucks adjusts coffee prices carefully due to elastic demand for luxury beverages.

20
Q

What is penetration pricing?

A

Setting a low price to gain market share quickly.

21
Q

What is price skimming?

A

Charging a high initial price and lowering it over time to attract different market segments.

Disney+ set low initial subscription fees to enter the streaming market. Sony uses price skimming for PlayStation consoles at launch.

22
Q

What is psychological pricing?

A

Setting prices that appeal to emotions, like $9.99 instead of $10.

23
Q

Why does odd-number pricing work?

A

Consumers perceive it as significantly cheaper than the next whole number.

McDonald’s sets prices like $4.99 for value meals to appear more affordable.

24
Q

What is predatory pricing?

A

Setting extremely low prices to drive competitors out of the market.

25
Q

Why is price discrimination controversial?

A

It involves charging different customers different prices for the same product.

Alleged predatory pricing cases have involved Amazon in various markets.

26
Q

What is promotional pricing?

A

Temporarily lowering prices to attract customers.

27
Q

Why do companies use geographical pricing?

A

To account for shipping costs or regional demand differences.

Coca-Cola adjusts prices for its products in different global markets.

28
Q

What is price fixing?

A

An illegal agreement between competitors to set prices.

29
Q

What is resale price maintenance?

A

A practice where manufacturers dictate minimum resale prices for retailers.

European Commission fined electronics companies like Philips for price fixing.

30
Q

What is value-based pricing?

A

Setting prices based on the value customers perceive in the product.

31
Q

Why is value-based pricing challenging?

A

It requires in-depth understanding of customer preferences.

Tesla uses value-based pricing for its electric vehicles, emphasizing innovation and environmental benefits.

32
Q

What challenges arise in global pricing?

A

Exchange rate fluctuations, local competition, and varying customer expectations.

33
Q

What is price standardization?

A

Setting a uniform price across all markets.

Apple implements global price standardization for iPhones but adjusts for VAT and tariffs.

34
Q

How does big data improve pricing decisions?

A

By analyzing customer behavior and market trends.

35
Q

What role does AI play in pricing strategies?

A

AI helps optimize prices in real time for maximum profitability.

Amazon uses AI-driven pricing algorithms to adjust product prices dynamically.

36
Q

What is a quantity discount?

A

A price reduction for buying in bulk.

37
Q

What is a trade allowance?

A

A discount offered to intermediaries for promoting or selling a product.

Costco offers bulk discounts on consumer goods.

38
Q

How is pricing different in non-profit organizations?

A

It often focuses on cost recovery rather than profit generation.

39
Q

Why do non-profits use pay-what-you-want pricing?

A

To make services accessible while encouraging donations.

Some museums like the Metropolitan Museum of Art use suggested donation pricing.

Marketing (5 decks)

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