Pricing Lecture Week 8 Flashcards
What is Pricing? And what does pricing actually mean?
pricing is the value exchanged in a marketing transaction. Total sales, revenue and profit.
Profit=
total revenue - total costs (expenses)
Profits=
(price x quantity sold) - total costs
Characteristics of price:
- a measure of value to both buyers and sellers.
- the amount of money charged for a product or service.
- The sum of all values that consumers exchange for the benefits and bonuses of having the product.
- Often the sellers notion of value.
- Start pricing with research for how consumers value the product.
- Hassle in shopping, finding the product, decision which product to buy, finding the store, finding the information.
What creates value via profits? And what creates marketplace value?
- Price.
2. Promotion.
What is Price Competition?
Emphasising price and matching/beating competitors prices. Main focus around price and maintaining and edge to beat competitors prices.
Name two or three price competition characteristics
To compete effectively, the firm must be the low-cost seller.
Frequent Price Wars
Flexibility is provided, beware of price wars highly competitive
What is Non-Price Competition?
Emphasising factors other than price to distinguish a product from competing brands.
What is a major advantage of Non-Price Competition?
A company can build customer loyalty and consumer satisfaction to its brand.
Name three or four Non-price competition characteristics
Features
Quality
Promotion
Packaging
What are the six important factors that influence Pricing Decisions?
- Customers perception of the product
- Customer interpretation of price
- Demand
- Other marketing mix variables
- Costs
- Types of pricing objectives
Name in the correct order the six steps for establishing prices
- Development of pricing objectives
- Assessment of target market`s evaluation of price
- Evaluation of competitors prices
- Selection of a basis for pricing
- Selection of a pricing strategy
- Determination of a specific price
Define pricing objectives
Pricing objectives are what the company/firm/business wants to achieve through pricing to maintain success and gain profits. Pricing objectives must be obviously stated and be completed in a certain timeframe- smart goals - SPECIFIC, MEASURABLE, ATTAINABLE/ACHIEVABLE, RELEVANT, TIMEBOUND
What does the assessment of the Target Market`s evaluation of Price refer to?
The significance/importance of price depends on the type of product, the type of target market and the purchase situation.
What does price also rely on?
Price also depends on the perception of value which is a combination of price and quality attributes.
What does price elasticity refer to?
Price elasticity is how much demand will change for a given change in price, price sensitivity.
Name the two different influences that effect price elasticity
Availability on substitute products - other similar goods.
Whether price change is perceived as temporary or permanent.
Describe the evaluation of competitors prices stage/step
In competitive situations & scenarios, marketers must keep prices the same as, or lower than competitors prices. Competitors prices: Price above (harvest) Price to march (hold) Price below (build)
Identify and describe the 5 various pricing selection methods
Cost-based pricing: adding a dollar amount or percentage to the cost of the product.
Cost-plus pricing: Adding a specific dollar amount or percentage to the seller`s cost.
Mark-up pricing: Adding to the cost of the product a predetermined percentage of that cost.
Value-based pricing: Based on the level of benefits offered by the other products.
Competition-based pricing: Influenced primarily by competitors prices.
Name/identify two/three pricing methods based on costs:
Simple to calculate Low risk approach Price will at least cover for the costs Doesn`t consider competitors prices Not related to market demand Not related to the PLC stage
Identify the four different pricing strategy categories and provide some examples from each pricing strategy
Differential pricing - Periodic & Random Discounting- New or used cars involves negotiation.
New-product pricing- Price skimming - highest price possible & Penetration pricing- lower prices than competitors, increase market share/market growth.
Product-line pricing: Captive- pricing the basic product in a product line low while pricing relative items at a higher level & Premium Pricing- pricing the highest quality or most versatile product higher than other models in the product line.
Psychological pricing: Everyday low costs/prices- setting a low price for products on a regular, constant, consistent basis. Odd-even pricing- ending the price with certain numbers to influence the buyers perception of the price or product pricing that attempts to influence a customers perception of price to make a products products price more attractive and appealing.
Promotional pricing: Price leaders.- e.g. $44.99 or $19.49. prestige pricing- Setting prices at al artificially high level to convey prestige or a premium quality level.
Comparison discounting.
Name two advantages and two disadvantages for new product pricing for the price skimming strategy
Advantages
1. Recover R&D costs more efficiently and quickly.
2. High price may signify high/premium quality.
Disadvantages
1. Market share growth is slow
Profits may attract competition.
Name two advantages and two disadvantages for new product pricing for the Penetration pricing strategy
Advantages 1. Builds market share (market penetration) 2. Discourages competition. Disadvantages 1. Longer time to recover costs 2. Possible cash flow problem.
Describe the determination of a Specific Price (tactical level decisions)
- The use of a systematic approach when establishing final price.
- Consider environmental forces & marketers understanding.
What are the different periods of the year to discounting for shops/stores/ and retail outlets?
Easter, Christmas sales, Winter, Summer- undifferentiated strategy. Compared to a differentiated strategy- any random time in the new world. Price reductions offered at specific times of the year.
Name and Identify the 8 types of price discounting
- Trade Discounts.
- Quantity discounts.
- Cash Discounts.
- Seasonal discounts.
- Allowances.
- Special-event pricing
- Periodic discounts.
- Random discounts.
Link the definitions to the Discounts for channel members:
Discounts designed and created to encourage fast/early payment if invoices
Cash discounts.
