Week 7 - Price Flashcards
define price
the amount of money charged for a product or service or the sum value exchange by consumer for the benefit of consuming the product or service
3 major pricing strategies
- ) customer value based pricing
- ) cost based pricing
- ) competition based pricing
explain price ceiling and floor
price celling - no demand above this price
pice floor - no profits below this point
Define customer value-based pricing
Setting the price based on buyers perception of the value, rather than sellers cost
Price is considered along with the other marketing mix variables BEFORE the marketing program is set.
difference between cost based and value based pricing
value based:
asses customer needs and value perceptions
set target price to match customer perceived value
determine costs that can be incurred
design product to deliver desired value at target price
Cost based: design product determine product costs set price based on costs convince buyers of products value
define good value pricing
offering just the right amount combination of quality and good service that customers want at a fair price
define value added pricing
rather than cutting prices to match competitors, marketers adopt this strategy attaching valued added features and services to differentiate their offerings and this supports higher prices
Define cost based pricing
Setting prices based on the cost of producing, distributing and selling the product, plus a fair rate of return for it’s effort and risk
Main Approaches
Cost Plus pricing (mark up pricing)
Breakeven pricing (target return)
two main types of costs
fixed costs = costs that do not vary with production or sales level
variable costs = costs that vary directly with the level of production
total costs = the sum of fixed and variable costs
define cost - plus pricing (marking up)
Adding a standard markup to the cost of the product
Define Breakeven pricing (target-return pricing)
setting the price to breakeven on the costs of making and marketing a product or to make a desired product
define competition based pricing
setting prices based on competitors strategies, costs, prices and market offerings
Consumers make their judgments of product value by comparing the prices that competitors charge for similar products.
define target costing
Starts with an ideal selling price based on customer value considerations and then targets costs that will ensure the price is met
types of markets
pure competition
monopolistic competition (goods non homogeneous)
oligopolistic competition
pure monopoly
price strategies for new products:
Price skimming = setting a high price for a new product to skim maximum revenue from segments willing to pay the high price; company makes fewer but more profitable sales
Market penetration = setting a low price for a new product order to attract a large number of buyers and a large market share
