Pricing Flashcards
consumers don’t necessarily want a low price all the time rather
they want a high value
price is the only element of the marketing mix that does not generate _______ but instead generate _______
costs; revenue
consumers may use the price of a product or service to judge
its quality, price is a powerful indicator of quality when consumers are less knowledgeable about the product quality
5 C’s of pricing
customers, costs, company objectives, channel members, competition
profit orientation
the firm focuses on target profit pricing, maximizing profits, or target return pricing
target profit pricing applies when
the firm has a particular profit goal
sales oriented firm
believes increasing sales helps the firm more than increasing profits, they think the overall market share better reflects their success than dollar sales
competitive parity
setting prices that are similar to those of major competitors
demand curve shows
how many units consumers will demand during a specific period of time at different prices
the horizontal axis on the demand curve measures
the quantity demanded at a specific price
the vertical axis on the demand curve displays
the price options
why may a demand curve not curve downwards
customers purchase prestigious products for their status, demand increases while price increases to a point
three demand influences on pricing decisions
demographic factors, psychological factors, price elasticity
demographic factors
number of potential buyers their ages education and gender, location of potential buyers, position of potential buyers, expected consumption rate of potential buyers, economic strength of potential buyers
psychological factors
how consumers will perceive various price of price changes
three types of psychological pricing strategy
prestige pricing, odd pricing, bundle pricing
price elasticity
measure of consumers price sensitivity
price elasticity equation
percent change in quantity demanded divided by percent change in price
oligopolistic competitive market
only a few firms dominate and they change their prices in reaction to competition to avoid upsetting and otherwise stable competitive environment
price wars
when two or more firms compete primarily by lowering their prices
competition
when many firms compete for customers in a given market but differentiate their products
pure competition
different companies that consumers perceive as substitutes sell commodity products so price usually depends on the laws of supply and demand
gray markets
employ irregular but not necessarily illegal methods by legally circumventing authorized distribution channels to sell goods at prices lower than those intended by the manufacturer
high/low pricing
relies on the promotion of sales appeals to price sensitive and price insensitive
