Pricing Lecture Flashcards
Demand-Based Pricing Strategies:
Target Costing: Figuring out what people are willing to pay for something then designing it to meet that cost.
Yield-Management: Managing capacity to maximize revenue; when demand is high and capacity is lower, price goes up. Done with flights and hotels.
Value-Based Pricing Strategies:
EDLP: Everyday low prices; has lowest price all the time –> save time, effort and money buying all in one place.
EVC: Economic Value to the Customer; ignores cost of product, prices to true economic value to customer. Good for B2B but sometimes harder with consumers.
New Product Pricing Strategies:
Skimming
Penetrating
Trial: Low introductory price, then raise price quickly thereafter.
Individual Product Pricing Tactics:
Two-Part Pricing: Pay for initial fee, then another fee (like with phones)
Payment Pricing: Breaking down price into multiple payments.
Multiple Products Pricing Tactics:
Bundling: Extra value, inducing trial,
Captive Pricing: Low initial investment then higher price for disposable item that goes with it (printers and ink, razors and blades).
Odd-Even Pricing:
Psychological pricing tactic;
Odd: Price that ends in decimal point, associated with cheaper, lower quality products
Even: Ends in whole unit of currency. Associated with higher quality, more expensive products
Price Lining:
Psychological pricing tactic; Tiers of pricing, middle tier usually gets bulk of market share.
Promotional Cues:
Psychological pricing tactic; Sales that signal there are bargains at a particular place –> get people to come for cheap item and while there they buy other stuff.
Price Planning:
Develop Pricing Objectives
Estimate Demand
Determine Cost
Evaluate Pricing Environment
Choose Pricing Strategy
Choose pricing tactics
Cost-Plus:
Determining cost then adding margin to it
E-Commerce Pricing:
Dynamic Pricing - Assessing supply and demand and changing price in real-time, less effective in consumer markets
Auction - like ebay
Promotional Cues:
Sales signal that there are bargains at a particular place
