Pricing Concepts Flashcards
- What are the Pricing objectives?
- Profit-Orientated - profit maximization. ROI
- Sales-Orientated - sales maximization. Based on Market Share
- Status Quo - meets competitors’ prices.
- Describe Elastic vs Inelastic Demand.
Elastic: consumer’s demand is sensitive to change in price.
Inelastic: consumer’s demand is NOT sensitive.
2.1. What affects Elasticity?
- Availability of substitutes
- Price relative to purchasing power
- Product durability
- Product’s other uses
- What are the types of costs determinant of the price?
- Variable cost - varies with changes in level of output.
2. Fixed cost - doesn’t change.
- What are the determinants of price?
- PLC Stage - high, stabilize, decrease, decrease more.
- Competition and Customer Loyalty
- Distribution - offer profit margins larger than usual to distributors.
- Internet and Extranet
- Promotion Strategy - increase customer interest
- Price Transparency - compare prices online in real time.
- Demand of Large Customers - stores demanding price
- Price-Quality
- What are the steps of setting a price?
- Establishing price goals
- Estimate demand, costs and profits
- Choose Price strategy
5.1. What are the demand based pricing tactics?
a) Price Skimming - high intro. price with heavy promotion.
b) Price Penetration - low price when introducing.
5.2. What are the cost based pricing tactics?
a) Markup Pricing - cost of buying product from produces plus amounts for profits and expenses.
b) Break-even Pricing - to reach total revenue equals total cost.
5.3. What are the competition based pricing tactics?
a) Discount – Quantity, Functional, Seasonal, Promotional, Rebate, Coupons.
b) Value-based Pricing - what seems good for customer.
c) Status Quo - price similar to competitor.
5.4. What are other types of pricing tactics?
- Single-price
- Flexible pricing
- Professional services
- Price lining
- Leader
- Bait
- Off-even
- Bundling
- Two-part
- Pay-what-you-want
- Package content reduction
