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Marketing Strategy > Pricing Strategy I > Flashcards

Pricing Strategy I Flashcards

1
Q

what is price

A

Price is that which is given up in exchange to acquire a good or service

In the broadest sense, price allocates resources in a free-market economy.

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2
Q

what is price to the seller

A

Price is revenue and profit source

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3
Q

what is price to the consumer

A

Price is the cost of something

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4
Q

what is the importance of setting the right price

A

Price is a Reflection of a Brand’s Image & Positioning. Setting the wrong price may damage the brand’s image.

Price is a Revenue Source and Profit Generator for a company. Brands may Lose Profits if prices are wrongly set too low; or Lose Customers (Revenue) if prices are wrongly set too high vis-à-vis competition.

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5
Q

what is revenue

A

Revenue = Unit Price X number of units sold

◆ Revenue pays for every activity.
◆ What’s left over is Profit.

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6
Q

Marketers must select a price
that is not too high or not too low, a price that equals the _____

A

perceived value to target consumers

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7
Q

what are the major consideration in setting price

A

product costs

competitor’s prices & other internal & external factors

consumer perceptions of value

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8
Q

what is price floor

A

no profits below this price

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9
Q

what is price ceiling

A

no demand above this price

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10
Q

what is internal factors

A

marketing objectives

marketing mix strategy

costs

organizational consideration

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11
Q

what is external factors

A

nature of the market & demand

competition

other environmental factors (economy, resellers, gov social concerns)

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12
Q

what are the 4 marketing objectives

A

survival

profit maximization

market share leadership

product quality leadership

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13
Q

what is survival

A

Low Prices Hoping to Increase Demand.

❖ If the Marketing Objective is to survive, then charge Low prices
e.g. $, This Fashion

❖ NOT a very good strategy

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14
Q

what is profit maximization

A

Choose the Price that Produces the Maximum Current Profit, Etc.

❖ Work out prices that gives maximum returns/profits to the company.
❖ The highest Return On Investments (ROI).

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15
Q

what is market share leadership

A

Low as Possible Prices to
Become the Market Share Leader.

❖ If Marketing Objective is to dominate the market, then set a price lower than competitors to draw competitors’ customers.

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16
Q

what is product quality leadership

A

High Prices to Cover Higher Performance Quality and R&D.

❖ Set high prices to cover Higher Performance Quality and R&D.

17
Q

what is marketing mix strategy (internal factors)

A

◆Price decisions must be coordinated with product design, distribution, and promotion decisions (the other 3 Ps) to form a consistent and effective marketing program.

➢Image/positioning of PRODUCT

➢Where and how the product is sold - PLACE

➢How the product is being communicated to the market
– PROMOTION

18
Q

what are the types of costs

A

fixed costs (overhead costs which dont vary w/ sales or production levels)

variable costs (costs vary directly w/ level of production raw materials)

total costs (sum of fixed + variable costs for any level of production)

19
Q

what are the organizational considerations (internal factors)

A

Cannibalisation – Take into consideration the issue of
whether the organisation wants to continue a product line or product item, when it introduces a new product. Cannibalisation of sales may arise.

20
Q

what is market and demand (external factors)

A
  • Customer responsiveness to price changes

➢ Demand is considered elastic, if $ goes up/down and demand changes drastically

➢ Demand is inelastic, If $ goes up/down and demand affected
minimally

21
Q

what is competition (external factors)

A

Competitors’ Strategies and Prices

▪ Comparison of offering in terms of customer value

▪ Set price competitively

22
Q

what are the other external factors

A

▪ Economic conditions
▪ Resellers’ response to price
▪ Government
▪ Social concerns
▪ Use of technology

23
Q

what are the 3 General Approaches to Pricing

A
  1. Cost-Based (cost-plus) Pricing
  2. Value-Based Pricing
  3. Competition-Based Pricing
24
Q

cost based pricing aka

A

cost plus pricing

25
Q

what is cost based pricing

A

➢ Cost-based pricing is product driven.

➢ The company designs what it considers to be a good product totals the costs of making the product, and sets a price that covers costs plus a target profit.

➢ Marketers must then convince buyers that the product’s worth at that price justifies its purchase.

26
Q

why is cost based pricing popular

A

◆Sellers more certain about cost than demand

◆Simplifies pricing

◆When all sellers use, prices are similar and competition
is minimized

◆Some feel it is more fair to both buyers and sellers

27
Q

what is value based pricing

A

◆ Value-based pricing is setting prices, based on customer
perceptions of the product value.

◆ As a result, pricing begins with analysing consumer needs
and value perceptions.

◆ This means that the company cannot design the product
and then set the price.

◆ The price is then set to match consumers’ perceived value.

◆ Good value DOES NOT MEAN ‘value-for-money’ here, and does not mean low prices. High-priced items or ostentatious/luxury items to many, means good value

28
Q

2 types of competition based pricing

A

◆Going-Rate Pricing

◆Sealed-Bid Pricing

29
Q

what is going rate pricing

A

➢Firm bases its price largely on competitors’ prices, with less attention paid to its own costs or to demand.

30
Q

what is Sealed-Bid Pricing

A

➢Firm bases its price on how it thinks competitors will price rather than on its own costs or on demand. This often applies to Govt tenders

31
Q

prices and stages in the Product life cycle (PLC)

A

introductory stage (high price)

growth stage (stable price)

maturity stage (decrease price)

decline stage (decrease -> stable -> high)

Marketing Strategy (9 decks)

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