T7 - price

Question 1

List some price objectives

Answer 1

1. profitability
2. long-term prosperity
3. market share
4. positioning (prestige pricing)

Question 2

Not-for-profit pricing

Answer 2

• don’t make profit but seek to cover operating costs

* Salvos

Question 3

Dodgy pricing methods

Answer 3

1. comparison discounting
   - explicitly quoting a discounted price and regular higher price together
2. bait pricing
   - artificially low price for one item in a product line then sell other expensive products
   * $10 jeans, the rest are $50
3. bait and switch
   - seller has no intention of selling low price item - just get customers in store
   * aldi
4. captive pricing
   - low price for basic product, important accessories are expensive
   * printer and ink

Question 4

Demand-based pricing (3)

Answer 4

1. on/off peak
2. surcharge pricing
3. negotiated pricing

Question 5

B2B pricing - each intermediary needs to make a profit (4)

Answer 5

1. functional discounts
   - costs less if they also help do something such as take care of transport fees, etc
2. quantity discounts
3. seasonal discounts
   - buying outside of peak selling period
4. cash discounts

Question 6

Psychology related pricing (4)

Answer 6

1. odd-even pricing
   - odd prices perceived as cheaper than even prices
   * 99c/kilo bananas vs $1/kilo
2. reference pricing
   - pricing product moderately compared to an expensive model
   * showing expensive houses, then a moderately priced one
3. multiple-unit pricing
   - bundles are sold cheaper than individual price
   * 6 pack ice cream cones
4. bundle pricing
   - selling combination of complementary products for cheaper price than buying them all individually
   * meal deals

Question 7

Pricing new products (2)

Answer 7

1. penetration pricing
   - low launch price, sell at high volume
2. price skimming
   - charge high initially but decrease price over time

Question 8

Pricing established products (7)

Answer 8

1. differential pricing
   - charging different buyers different pricces
   * xmas sales, cheap Tuesdays
2. special-event pricing
3. promotional pricing
4. random discounting
5. every day low prices
6. trade-in allowances
7. promotional allowance
   - discount in return for participating in marketing campaigns

Question 9

Secondary market pricing

Answer 9

Setting different prices for different target markets

* concession discounts