Unit 9- Price Flashcards
what are the steps in price planning?
- develop pricing objectives
- estimate demand
- determine costs
- evaluate the pricing environment
- choose a pricing strategy
- develop pricing tactics
what is price?
the assignment of value, or the amount the consumer is willing to exchange to receive the offering
-only element in the 4ps=revenues
most flexible/most complicated
what is demand? (estimate demand)
customers desires for a product + the resources to obtain it
what is the law of demand?
as price goes up, quantity demanded goes down
what are fixed costs?
costs of production that don’t change with number of units produced
what are variable costs
costs of production that are tied to & vary depending on the number of units produced
what are pricing strategies based on cost?
simple to calculate & risk free
cost plus pricing
what is cost-plus pricing
total all product costs & add markup
what are pricing strategies based on demand?
based on estimate of quantity a firm can sell at different prices
what is target costing?
identify quality & functionality customers need & price they’re willing to pay before designing product
what is yield management pricing?
charge different prices to different customers to manage capacity
what pricing strategies based on customers needs?
value pricing or everday low pricing
what are everday low pricing (EDLP)
pricing strategy in which a firm sets prices that provide ultimate value to customers
what are pricing strategies based on the competition?
pricing near, at, above, or below the competition
what’s skimming price?
a very high premium price (important benefits, little chance for competitors to react fast, several customer segments w/different levels of sensitivity)
what is market-penetration pricing?
a very low price to encourage more customers to purchase
what is trial pricing?
low price for a limited period of time
what is two-part pricing? (individual)
offering 2 separate types of payments to purchase the product
ex/ device + cell plans
what are payment pricing? (indvidual)
breaking total price into smaller amounts payable over time
what is price bundling (multiple)
selling 2 or more goods or services as a single package for one price
what is captive pricing?
pricing two products that work only when used together
what are the advantages for companies using dynamic pricing strategies
cost of changing prices on internet is practically zero
firms can respond quickly & frequently to changes in costs, supply & demand
what are the advantages for consumers for dynamic pricing strategies
consumers gain control/more negotiating power
search engines & shop bots make customers more price senstive
what is the break even concept?
point where your sales revenues covers both variable & fixed costs
(no net loss or gain)
what are variable costs
costs directly associated w/the manufacture or wholesale purchase of a product
what are fixed costs
monthly expenses regardless of the level of production or sales
what is targeted return on investment (ROI)
The profit an organization hopes to make given the amount of assets, or money, it has tied up in a product
what is maximizing profits?
set prices to increase revenues as much as possible, relative to costs
what are maximizing sales?
pricing products to generate as much revenue as possible, regardless of what it does to a firms profits
what is maximizing market share
set prices allows capturing a larger share of the sales
what is maintaing the status quo?
meet or equal competitors prices
what is breakeven points (BEP)
the point where total costs equal total revenue
