Pricing Decisions

Question 1

What are the Factors that Affect Pricing Decisions:

Answer 1

Organisational and Marketing Objectives
Types of Pricing Objectives
Costs
Marketing Variables other than Price
Customer Interpretations of and Responses to a Price
Customer Perception of the Product
Demand

Question 2

Factors that Affect Pricing Decisions:

Organisational and Marketing Objectives…

Answer 2

Prices should be set CONSISTENT with the GOAL and mission of organisations e.g. Product quality leadership

Question 3

Factors that Affect Pricing Decisions:

Types of Pricing Objectives..

Answer 3

Increase market share

Raise cash quickly

Question 4

Factors that Affect Pricing Decisions:

Costs…

Answer 4

Sets the price floor

Reducing cost is an increasing trend for price sensitive markets

Question 5

Factors that Affect Pricing Decisions:

Marketing Mix Variables Other than Price…

Answer 5

High quality PRODUCT is associated with high price
Premium PRICED products use selective distributions
Premium prices are less PROMOTED

Question 6

Factors that Affect Pricing Decisions:

Customer Interpretations of and Responses to a Price…

Answer 6

What the price means to the customer

Whether the price will move customers closer to the purchase and enhance customer satisfaction

Question 7

Factors that Affect Pricing Decisions:

Demand…

Answer 7

A graph of the quantity of a product taken by buyers in the market at various prices given that all other factors are held constant

Question 8

What is the Basis for Pricing?

Answer 8

Cost-based pricing - Adding a specific dollar amount or % to the cost of the product
Value-based - Based on the level of benefits offered by the products
Competition- based pricing - Influenced primarily by competitor’s prices

Question 9

What are the two Pricing Strategies for new Products?

Answer 9

Price Skimming - Charging the highest possible price that buyers who most desire the product will pay
Penetration pricing - Setting prices below those of competing brands to penetrate a market and gain a significant market share quickly

Question 10

List the 6 types of Pricing Strategies:

Answer 10

Differential Pricing - Charging different prices to different buyers
New-Product Pricing
Product-Line Pricing - Establishing and adjusting prices of multiple products within a product line
Psychological Pricing - Pricing that attempt to influence a customer’s perception of price
Professional Pricing - Fees set by people with great skill
Price Discounting - Trade, quantity, cash, seasonal disocunts