Setting Prices Flashcards
Explain the concept if price elasticity if demand
How much demand varies with the price. Houses would be quite inelastic while bracelets would be verry elastic
How is price related to cost, quality and value
Price needs to make up for cost, quality is costly but justifies a price premium and value is the difference between the difference in worth of quality and the price
How do customers perceive price
They use well-known reference prices context and signs to determine value
Which are the four pricing strategies
Pricing premium, penetration pricing, economy pricing and price skimming
What is premium pricing
Price an offering high to indicate its distinctiveness in the market
Explain penetration pricing
Price lower than competition to gain market share
Explain economy pricing
Price bare minimum to attract sensitive buyers
Explain price skimming
Setting price high and them lower in sequential steps. Like bartering or to make it seam low in comparison to the past
Which are the two classical approaches when pricing new offerings
Price penetration and skimming
When should you apply market skimming
When you need to recover rnd costs quickly, when product lifecycle is short or when customers price sensitivity is low or unknown
When should you use price penetration
When recovering rnd costs is not pressing, customer price sensitivity is known to be high and product life cycles are long
Explain going rate pricing
Set your price based in the competition
What types of pricing exists in b2b
Geographical, negotiated, discount, value in use, relationship, pay what you want, transfer, consumer value and bid pricing strategies
What is show rooming
Chucking out something in a store and buying them cheaper online
What is webrooming
Researching products online to buy them in stores
Why increase price
It has a disproportionally good effect in profits. A study showed that 1% increase in price led to 9% greater profit as that money goes directly to net revenue.
Does higher price mean higher quality
There is only a weak link
Are consumers usually price councius
No, especially if they have contract free credit cards
What is odd number pricing
Ending a price in nine because people have not learned to round yet
Explain price anchoring
We expect prices to be what we saw first so if it becomes lower people think it is cheap
What is pure price bundling
Adding some gift with a product to make the price seam reasonable
What is mixed price bundeling
Offering a lower price if you buy things in a bundle than if you would buy them individually
What are price guarantee schemes
Promising to match competitors cheaper prices as a statement hoping people actually dint check
Do you have to respond in kind to a price war
It depends how consumers react to the price decrease. If the reaction is modest you may want to instead advertise your quality or cator more
Explain value oriented pricing
To set prices where consumers see it as fair and valuable, not considering cost
Which launch pricing strategy should you take if there is a strong threat from competitors, the product is not that differentiated, there are low barriers to entry and there are positive economics of scale
Market penetration
What is surge pricing
To adapt prices in real time to demand
What is loss leader pricing
Set a price lower than the cost to lure customers to a place where they are likely to spend
What is promotional pricing
Temporarily lowering prices to increase awareness, free trial comes to mind
Explain segmentation pricing
Setting different prices for different groups. Aka price discrimination
What is customer centric pricing
Creating a bundle with a price catering to a specific type of customer
What is pay what you want pricing
Offering an open price for publicity, often used by street musicians
Explain free in board destination pricing
When the manufacturer pays for shipping but not other transportation
What is transfer pricing
Prices at transfers where one party control both buyer and seller to tailor the transaction so it looks good un the books
