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MM > Understanding 'price' in the market mix (7) > Flashcards

Understanding 'price' in the market mix (7) Flashcards

1
Q

the 4 Ps of marketing,

A
  • Product
  • Price
  • Places
  • Promotion
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2
Q

Create a competitive advantage?

A
  • The following are some common pricing objectives
  • Maximise long-term profit
  • Maximise short-term profit
  • Increase sales volume
  • Increase monetary sales
  • Increase market share
  • Obtain a target rate of return on investment (ROI)
  • Obtain a target rate of return on sales
  • Maintain price leadership
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3
Q

There are four types of pricing that an organisation can use in order to set the prices that they wish to sell their products at. Let’s have a look at the different types of pricing that can be used

A
  • Competitive pricing
  • Prestige pricing
  • Profitability pricing
  • Volume pricing
  • Competitive pricing
    Competitive pricing matches the price that is set by an industry leader for a particular product. The organisation aims to have prices that are similar to competitor prices and to attract customers by other means – e.g. better quality or customer service.
  • Prestige pricing
    Prestige pricing sets a product’s price at a higher level in order to associate that product with a high standard and give it an improved image. This approach limits sales, but the high mark-up on each product makes it possible to make a profit.
  • Profitability pricing
    Profitability pricing aims to ensure that a product’s price is competitive as well as profitable. Organisation’s that take this approach need to consider how many products are sold, and must monitor the price to make sure that sales do not decrease as a result of price increases.
  • Volume pricing
    Volume pricing sets the product’s price low, with the expectation that this will drive sales. This approach aims to sell high volumes of the product on a large scale, which reinforces the brand name among consumers and increases profits in the long run.
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4
Q
A

Competitive pricing
Prestige pricing
Profitability pricing
Volume pricing

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5
Q

ExplainCompetitive pricing?

A

Competitive pricing matches the price that is set by an industry leader for a particular product. The organisation aims to have prices that are similar to competitor prices and to attract customers by other means – e.g. better quality or customer service.

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6
Q

Explain Competitive pricing?

A

Competitive pricing matches the price that is set by an industry leader for a particular product. The organisation aims to have prices that are similar to competitor prices and to attract customers by other means – e.g. better quality or customer service.

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6
Q

Which type of pricing is used when an organisation keeps
close eye on sales to ensure that increases in the price of
products does not decrease the number of products sold?

A

Profitability pricing

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7
Q

Explain Prestige pricing?
.

A

Prestige pricing sets a product’s price at a higher level in order to associate that product with a high standard and give it an improved image. This approach limits sales, but the high mark-up on each product makes it possible to make a profit

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7
Q

Which type of pricing aims to price products at a similar price
to those of competitors, while attracting customers with
better services or product quality?
Volume pricing
Prestige pricing
Profitability pricing
Competitive pricing

A
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8
Q

Explain Profitability pricing?

A

Profitability pricing aims to ensure that a product’s price is competitive as well as profitable. Organisation’s that take this approach need to consider how many products are sold, and must monitor the price to make sure that sales do not decrease as a result of price increases.

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9
Q

Explain Volume pricing?

A

Volume pricing sets the product’s price low, with the expectation that this will drive sales. This approach aims to sell high volumes of the product on a large scale, which reinforces the brand name among consumers and increases profits in the long run.

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10
Q

Which type of pricing aims to price products at a similar price
to those of competitors, while attracting customers with
better services or product quality?

A

Competitive pricing

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11
Q

Organisations use pricing to market their products as being more ‘high end’ and of better quality?

A

prestige

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12
Q

pricing involves selling products at a lower price with the expectation that it will encourage a higher number of sales?

A

Volume

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13
Q

Which pricing objective should an organisation consider when determining its pricing strategy?

A

Promoting the image of the organisation in the eyes of its customers

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14
Q

A penetration pricing strategy is well-suited to organisations that wish?

A

to build customer loyalty and gain market share quickly and hope to generate profits from repeated sales.

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15
Q

A skimming pricing strategy targets a broad market in three stages, and is an effective approach when introducing a new product. This strategy involves?

A
  • setting a higher price as the product is launched and then reducing the price over time.
    Customers who are willing to pay the higher price to be first in line will purchase the product during its first phase
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16
Q

Economy pricing is a no-frills pricing strategy where ?

A

relatively low-quality products are priced low

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17
Q
  • Pricing strategy
A

Economy Low quality-Low price
No-frills pricing strategy where relatively low-quality products are priced low

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18
Q

Explain Penetration?

A

Penetration
High quality – Low price
Includes offering a reduced price or free samples of a product to draw customers, and then increasing to the regular retail price over time

19
Q

Explain Skimming?

A

Skimming
-High price - Low quality
- Targets a broad market in three stages, and is an effective approach when introducing a new product Premium

20
Q

Explain Premium?

A

Premium
High price - High quality
Strategy for high-priced products of high quality, as well exclusive products

21
Q

Pricing strategies need to reflect how the prices of goods and services affect?

A

their supply and demand in the marketplace

22
Q

The term ‘elasticity’ refers to?

A

the degree to which a demand or supply curve reacts to a change in price.

23
Q

The factors listed below may influence the price elasticity of a product?

A
  • Number of substitutes
  • Degree of necessity
  • The price of the product as a proportion of income
  • Number of substitutes: If there are many substitute options for a product, it will be easier to change to a different product if there is a price increase. If there are few alternatives, however, then the demand for that product is inelastic as consumers do not have other options.
  • Degree of necessity: The price of essential goods has an inelastic effect on demand, while non-essentials have an elastic effect.
  • The price of the product as a proportion of income: Products that account for a large proportion of a person’s disposable income are often elastic, as consumers are more aware of small changes in the price of expensive goods than they are of small changes in the price of inexpensive goods.
24
Q

Which pricing strategy introduces products at a low price to attract customers, and then increases this price at a later stage?

A

Penetration pricing strategy

25
Q

Which factors may have an effect on a product’s price elasticity?

A

How elastic the product is, how the price of the product is influenced by supply and demand, and how much of a person’s income goes toward the product The number of altemalive products, how much of a necessity the product is, and how much of a person’s income goes toward the product

26
Q

What are the three stages of the skimming price strategy?
Introduce the product to the market at a low price, raise it
after a while to increase sales, and finally raise the price
even higher when the demand has increased

A

Introduce the product to the market at a high price, lower it
after a while to increase sales, and finally, raise the price
even higher when the demand has increased
introduce the product to the market at a competitive price,
raise it after a while to increase sales, and finally drop the
price lower when the demand has decreased
Introduce the product to the market at a high price, lower it
after a while to increase sales, and finally drop the price.
even lower when the demand has decreased

27
Q

Introduce the product to the market at a high price, lower it after a while to increase sales, and finally drop the price even lower when the demand has decreased?

A
28
Q

Which factors may have an effect on a product’s price elasticity?

A

The number of alternative products, how much of a necessity the product is, and how much of a person’s income goes toward the product

29
Q
A
  • Coupons - Coupons can be used to promote new products or spark interest in mature or old products. They can also be used to draw in new customers who do not usually buy products of that brand, in the hope that they will make repeat purchases
  • Prepayment - A prepayment plan can be used to increase sales by offering customer discounts.
  • Price shading - allows salespeople to offer discounts on the product’s price, usually to buyers in industrial markets who purchase the product regularly and in high volumes.
  • Seasonal pricing - involves adjusting prices based on seasonal demands. Prices are set high during seasons of high demand and lowered as the demand decreases.
  • Term pricing - encourages customers to pay for products or settle accounts up-front or within a specific time period. This approach is often used with industrial buyers, who may be incentivised with discounts for paying early or paying in cash (Encyclopedia.com, n.d.).
  • Segment pricing - involves offering different prices to different segments of the market in an attempt to make the product available to more people and increase sales.
  • Volume discounts - Volume discounts incentivise customers to purchase large quantities of a product by offering them discounts for buying in high volumes.
30
Q

What option is available to an organisation if a competitor
changes their prices?

A

Price shadowing in the interest of attracting customers, an organisation raises their prices sometime after its competitors raise their prices

31
Q

Which two pricing strategies are used to price products according to their quality?

A

Economy and premium pricing strategies

32
Q

Which pricing strategy introduces products at a low price to attract customers, and then increases this price at a later stage?

A

Penetration pricing strategy

33
Q

What are the three stages of the skimming price strategy?

A

Introduce the product to the market at a high price, lower it after a while to increase sales, and finally drop the price even lower when the demand has decreased

34
Q

What are the three stages of the skimming price strategy?

A

Introduce the product to the market at a high price, lower it after a while to increase sales, and finally drop the price even lower when the demand has decreased

35
Q

Which sales tactic is used when products are priced according to their demand and the time of year?

A

Seasonal pricing

36
Q

Why are volume discounts an effective sales tactic?

A

Organisations sell more of a product, as customers are encouraged to buy more of that product if it means that they will qualify for a discount

37
Q

Which sales tactic is used when products are priced according to their demand and the time of year?

A

Seasonal pricing

38
Q

Which sales tactic involves using discounts and gift cards to increase sales?

A

Prepayment plans

39
Q

pricing is used when the same product is offered to distinct groups of customers at different prices.

A

Segment

40
Q

Both the fixed costs and the variable costs must be considered when conducting a?

A

break-even analysis.

41
Q

Break-even graph can be used to determine the total revenue, total costs,

A

variable costs and fixed costs of producing a certain number of units of a product.

42
Q

As the figure above indicates, different pricing strategies need to be considered for each of the phases in the product life cycle:

A
  • Introduction phase: Skimming is a more common policy to adopt for the introduction of a new product as costs are high and sales are low.
  • Growth phase: A market penetration policy can be effective in order to reach a wider audience.
  • Maturity phase: There will be extreme fine-tuning of all aspects of the marketing procedure in order to stay one step ahead of the competitors.
  • Decline phase: Key decisions here would involve price cutting and even possible withdrawal from the market.
43
Q

What does the method of value-based pricing entail?

A

Adjusting the price of a procunt depending on the value
the customers perceive it to have

44
Q

Which pricing strategy should be considered during growth stage in the product life cycle?

A

Penetrative pricing strategy

45
Q

Which three aspects need to be taken into account with psychological pricing?

A

The organisation’s position in the market, the price point of the product and the perceived fairness of the price

46
Q

Which pricing method looks at a specific profit margin, as well
as the fixed costs and production costs?

A

Cost-plus pricing

MM (10 decks)

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