Week 7 Flashcards
Price
the money or other considerations exchanged for the ownership or use of a product or service - indicate value
pricing objectives (6)
- sales revenue
- quantity sold (unit volume)
- market share
- profit
- survival
- social responsibility
considerations in setting price
- pricing constraints
- demand for the product class and brand
- newness of the product
- cost of producing
- single product vs product line
- type of competitive market
- competitor’s prices and consumer’s awareness
- legal and ethical considerations
setting a final price
- identify pricing objectives and constraints
- estimate demand and revenue
- determine cost, volume, and profit relationship
- select an approximate price level
- set the list or quoted price
- make special adjustments to the list or quoted price
general pricing approaches
finding an approximate price level and use it as a reasonable starting point
demand oriented pricing approach
biggest factor is expected customers taste and preferences
skimming pricing
high initial price
penetration pricing
low initial price
prestige pricing
high price
price lining
elastic at each price points but inelastic between price points
odd even pricing
setting a few dollars or scent under an even number
bundle pricing
marketing two or more products in a single package price
yield management pricing
charging at different prices to maximize revenue
cost oriented pricing approaches
production and marketing costs
standard markup pricing
adding a fixed percentage of all items
cost plus pricing
adding a specific amount to the cost
profit oriented pricing approach
target profit pricing - annual target of a specific dollar volume of profit
target return on sales pricing - profit that is specified percentage of sales vol
target return on investment pricing - annual target return on investment
profit equation
total revenue - total cost
competition oriented pricing approaches
- customary pricing
- loss leader pricing
- above, at, or below market pricing
one price policy and dynamic price policy
- setting one price for all buyers
- different prices in real time in response to demand and supply conditions
calculate final price
list price - (incentives + allowance)+extra fees
value pricing formula
value = perceived benefits/price
pricing objectives-profit
- return on investment (ROI)
- return on assets (ROA)
- managing for long run profits
- maximizing current profit objective
- target return (profit goal)
types of competitive market (4)
- pure competition
- monopolistic competition
- oligopoly
- pure monopoly
demand factors (3)
- consumer’s taste
- price and availability for similar products
- consumer income
assess the effect of price changes on profit
Break even point
fixed cost/unit price-unit variable cost
price discrimination
charging different prices to different buyers for products of like grade and quality
deceptive pricing
involves - price deals that mislead consumers
predatory pricing
charging very low prices with the intent of driving competitors out of business
price war
successive price cutting by competitors to increase or maintain their unit sales or market share
product line pricing is
setting of prices for all items in product line to cover the total cost and produce a profit for the complete line not for each item
consider price cutting (3)
- if the company has competitive advantage
- if primary demand will grow
- if price cut is for specific product
Quantity discounts
- noncumulative quantity discounts
- cumulative quantity discounts
- seasonal discounts
noncumulative quantity discounts
- based on the size of an individual purchase order (encourage large individual purchase order)
cumulative quantity discounts
- apply to the accumulation of purchases of a product over a given time period, typically a year (encourage repeat buying)
step 6: make special adjustments to the list or quoted price
- discounts
- allowances
- geographical adjustments
trade (functional) discounts
cash discounts
trade (functional) discounts: rewards retailers for performing marketing functions
cash discounts: encourages retailers to pay bills quickly
trade in allowances:
promotional allowances:
trade in allowances: price reduction for trading used product for new product
promotional allowances: cash or free goods awarded sellers in marketing channel for advertising promoting a product
- everyday low pricing (EDLP)
Step 6: make special adjustments to the list
- geographical adjustments
- FOB origin pricing
- uniform delivered pricing (4)
legal and ethical considerations for pricing
- price fixing (3)
- price discrimination
- deceptive pricing
- predatory pricing
5 common deceptive pricing practices
- bait and switch
- bargains conditional on other purchases
- comparable value comparisons
- comparisons with suggested prices
- former price comparisons
