WK 7: Price Flashcards
Define Pricing
capturing value back from the customer in exchange for the value provided in the product. Combination of strategic and financial analysis.
5 Strategic considerations in pricing?
Marketing objectives: Setting a goal e.g. increase market, increase sales, improve profits.
Government regulations: Regulations that increase prices.
Customer perceptions: Quality the customer assumes your product is.
Market demand: Price of a product changes based on relative supply and demand.
Competition: Prices set by competition.
Define break-even analysis and break-even point
Break-even analysis - A method of calculating he minimum volume of sales needed at a given price to cover all costs.
Break-even point - Sales volume at a given price that will cover all a company’s costs.
List the nine-pricing methods
1) Cost-based pricing
2) Value-based pricing
3) Optimal pricing
4) Skim pricing
5) Penetration pricing
6) Loss-leader pricing
7) Auction pricing
8) Participative pricing
9) Free and freemium pricing
Define cost based pricing
Adding a mark-up to the cost of producing a product.
- Doesn’t factor in external factors e.g. demand, market conditions.
Define value-based pricing
Based on perceived value in the marketplace.
- Requires more info and analysis.
Define optimal pricing
attempts to minimise error and guesswork of other methods by using computer software.
Define skim pricing
Introductory phase, take advantage of high demand to set a high price that will later be lowered.
Define penetration pricing
Opposite of skim, charging low initial price.
- Can raise concerns about quality.
Define loss-leader pricing
Setting a very low price for one product, at the same time enticing customers to a complementary good.
Define auction pricing
Allows buyers to competitively bid on the products being sold.
Define participative pricing
“Pay what you want” pricing.
Define free and freemium pricing
Some aspects are free, other aspects are acquired at a price.
3 Price adjustment tactics?
Discounts: Temporary lowering price.
Bundling: Combine products then sell at a reduced price.
Dynamic pricing: Constantly repricing in response to changes in Supply/Demand.
