Week 14 Retail Pricing

Question 1

is what consumers pay for the finished product.

Answer 1

Retail price

Question 2

These customers don’t purchase the item to resell it but to use it.

Answer 2

Retail price

Question 3

The fundamental objective for a retailer when setting a price is to maximize the profit while setting a price that customers will be ready to pay.

Answer 3

Retail price

Question 4

Pricing strategies (13)

Answer 4

1. Cost-plus pricing
2. Competitive pricing
3. Value-based pricing
4. Price skimming
5. Discount pricing
6. Penetration pricing
7. Keystone pricing
8. Manufacturer suggested retail price
9. Dynamic pricing
10. Multiple pricing
11. Psychological pricing
12. Loss-leader pricing
13. Premium pricing

Question 5

__________________ is also known as mark-up pricing, is the easiest way to determine the price of a product.

Answer 5

Cost-plus pricing

Question 6

You make the product, add a fixed percentage on top of the costs, and sell it for the total.

Answer 6

Cost-plus pricing

Question 7

Let’s say you just started an online t-shirt business and you want to calculate the selling price for a shirt. The cost for making the t-shirt are:

Material costs: P5
Labor costs: P25
Shipping costs: P5
Marketing and overhead costs: P10
You could then add a markup – say 35%—to the P45 total it cost to make your

product. Here’s what that formula looks like:
Cost (P45) x Markup (1.35) = Selling price P60.75

Answer 7

Cost-plus pricing

Question 8

It refers to using competitors’ pricing data as a benchmark and purposely pricing your products below theirs.

Answer 8

Competitive pricing

Question 9

For example, for businesses in industries with highly similar products where price is the only differentiator, you may rely on price to win customers.

Answer 9

Competitive pricing

Question 10

__________________, also known as price-to-value, refers to setting a price based on how much the customer believes a product or service is worth.

Answer 10

Value-based pricing

Question 11

It’s an approach that takes your target market’s wants and needs into consideration when establishing the value of the product.

Answer 11

Value-based pricing

Question 12

Companies that sell unique or highly valuable products are better
positioned to benefit from value-based pricing compared to ones that sell standard day-to-day items.

Answer 12

Value-based pricing

Question 13

when an e-commerce business charges the highest initial price that customers will pay; then lowers it over time as market competition and saturation rise.

Answer 13

Price skimming

Question 14

As a result, there are higher short-term profits. The goal is to drive more revenue while demand is high and competition low.

Answer 14

Price skimming

Question 15

Apple reportedly uses this pricing model to cover the costs of developing new products like the iPhone.

Answer 15

Price skimming

Question 16

also works when there is product scarcity. For example, high-in-demand, low-supply products can be priced higher, and as supply catches up, prices drop.

Answer 16

Price skimming

Question 17

Discounting is a top pricing method for retailers across all sectors, with one survey finding that 28% of shoppers usually seek out coupons before buying online.

Answer 17

Discount pricing

Question 18

There are several benefits to discount pricing strategies, including increasing foot
traffic to your store, offloading unsold inventory, and attracting more price-conscious customers.

Answer 18

Discount pricing

Question 19

A ___________________________ strategy is useful for new brands trying to break into a market.

Answer 19

Penetration pricing

Question 20

That’s because this strategy introduces a new product at a low price in an effort to gain market share, then increases the price over time.

Answer 20

Penetration pricing

Question 21

is a product pricing strategy in which you mark up the retail price
by simply doubling the wholesale cost paid for a product. The simplest way to think of keystone pricing is:

Wholesale price x 2 = Retail price

For example, if a product costs you P15 from the manufacturer, your retail price

                  would be P30.

      P15 x 2 = P30 retail price

Answer 21

Keystone pricing

Question 22

is the price a manufacturer
recommends retailers use when selling a product.

Answer 22

Manufacturer suggested retail price

Question 23

Manufacturers first started using
MSRP as a pricing strategy to help standardize prices of the same product across multiple locations and retailers.

Answer 23

Manufacturer suggested retail price

Question 24

Retailers often use the MSRP with high-ticket products such as consumer electronics and appliances.

Answer 24

Manufacturer suggested retail price

Question 25

Ever try to get an Uber on a Friday night and notice the price is higher than usual? That’s ______________ in action.

Answer 25

dynamic pricing

Question 26

action. _______________________ is when a company continuously adjusts its prices based on different factors, such as competitor pricing, supply, and consumer demand.

Answer 26

Dynamic pricing

Question 27

The goal is to increase profit margins for the business.

Answer 27

Dynamic pricing

Question 28

For brands like Uber, rider fares depend on variables like route time and distance, traffic, and the current rider-to-driver demand. Prices are determined by rules or self-improving algorithms that take these variables into account when making pricing decisions.

Answer 28

Dynamic pricing

Question 29

It’s common for grocery stores, apparel companies, and e-commerce businesses to adopt a ___________________ strategy, in which retailers sell more than one product (think socks, underwear, and t-shirts in apparel, where the items might sell five for P30 or buy one, get one free) for a single price.

Answer 29

Multiple Pricing

Question 30

This tactic is also known as product bundling.

Answer 30

Multiple Pricing

Question 31

____________________, or charm pricing, leverages prices to influence a consumer’s spending behavior—with the goal of increasing business sales and revenue.

Answer 31

Psychological pricing

Question 32

A strategy to accomplish this is pricing items so they end with “99”; a product that’s priced at P4.99 appears substantially cheaper at first glance than a product priced at P5.00.

Answer 32

Psychological pricing

Question 33

__________________________ is when consumers are lured into a store by the promise of a discount on a hot-ticket product, and they buy that product along with several others as well.

Answer 33

Loss-leader pricing

Question 34

With this strategy, retailers attract customers with a desirable discounted product and then encourage them to buy additional items.

Answer 34

Loss-leader pricing

Question 35

A prime example of_______________________ strategy is a grocer that discounts the price of peanut butter and promotes complementary products like loaves of bread, jelly, jam, and honey with normal prices.

Answer 35

Loss-leading pricing

Question 36

While the original item might be sold at a loss, the retailer can benefit from having an upselling and cross-selling strategy in place to encourage more sales.

Answer 36

Loss-leading pricing

Question 37

___________ usually happens for products that buyers are already looking for, with high product demand, that drives more customers in the door.

Answer 37

Loss-leading pricing

Question 38

With _______________, brands benchmark their competition then price products higher to give the impression of being more luxurious, prestigious, or exclusive. For example, a premium price works in Starbucks’ favor when people choose it over a lower-priced competitor like Dunkin’.

Answer 38

premium pricing

Question 39

Alternatively, ____________________________ proved less effective for Netflix in certain markets where consumers earn less and are more price conscious—a reflection of the importance of knowing your target market.

Answer 39

Premium Pricing

Question 40

Be confident and focus on the differentiated value you provide to customers. For example, excellent customer service and strong branding can help justify higher prices.

Answer 40

Premium pricing

Question 41

Pricing strategy examples (4)

Answer 41

1. Premium pricing: Gucci 2. Value-based pricing strategy: Fashion Nova 3. Penetration pricing strategy: Netflix 4. Competitive pricing strategy: Costco