Chapter 14

Front 1

Consumer psychology and prices

Back 1

Price and benefit are compared to determine value BUT marketing also assumes that there are psychological effects of pricing.

Front 2

Consumer psychology and prices: Reference Prices

Back 2

Reference prices defined as any price to which a buyer compares an offer. Buyers use this comparison to judge the value of the deal.
*The value that buyers get from the deal is often as important as the value they get from the price-benefit tradeoff.

Front 3

BEP Quantity

Back 3

FC/(P-VC)= Break even units

Front 4

Prestige Pricing

Back 4

Setting a high price to attract status/quality conscious customers.

Front 5

Price Lining

Back 5

Firm with a product line instead of single product may price them at a number of different specific pricing points.
Ex: Dept stores

Front 6

Target Pricing

Back 6

Manufacturer deliberatly adjusting the composition and features of a product to achieve the target price to consumers. They estimate the price they think the people would be willing to pay, then work backwards.

Front 7

Bundle Pricing

Back 7

the marketing of two or more products into a single package price.
Ex: Delta Airline offers vacation packages including air/car rental/hotel

Front 8

Yield Manangement Pricing

Back 8

the charging of different prices to maximize revenue for a set amount of capacity at any given time.
Continually matches demand and supply
Ex: airlines, hotels, cruises

Front 9

Cost Oriented Pricing Approach

Back 9

Price setter stresses cost side of pricing, not the demand. Looks at production/marketing costs then add in direct expenses, overhead, and profit.

Front 10

Cost Oriented Pricing Approach (Standard Markup Pricing)

Back 10

Adding a fixed % to the cost of all items in a specified product class
>>High volume products have smaller markups than low volume
>>Good when, impossible to estimate demand across a variety of items
>>Ex: Krogers

Front 11

Consumer psychology and prices

Back 11

Price and benefit are compared to determine value BUT marketing also assumes that there are psychological effects of pricing.

Front 12

Consumer psychology and prices

Back 12

Price and benefit are compared to determine value BUT marketing also assumes that there are psychological effects of pricing.

Front 13

Consumer psychology and prices: Reference Prices

Back 13

Reference prices defined as any price to which a buyer compares an offer. Buyers use this comparison to judge the value of the deal.
*The value that buyers get from the deal is often as important as the value they get from the price-benefit tradeoff.

Front 14

Consumer psychology and prices: Reference Prices

Back 14

Reference prices defined as any price to which a buyer compares an offer. Buyers use this comparison to judge the value of the deal.
*The value that buyers get from the deal is often as important as the value they get from the price-benefit tradeoff.

Front 15

BEP Quantity

Back 15

FC/(P-VC)= Break even units

Front 16

BEP Quantity

Back 16

FC/(P-VC)= Break even units

Front 17

Prestige Pricing

Back 17

Setting a high price to attract status/quality conscious customers.

Front 18

Prestige Pricing

Back 18

Setting a high price to attract status/quality conscious customers.

Front 19

Price Lining

Back 19

Firm with a product line instead of single product may price them at a number of different specific pricing points.
Ex: Dept stores

Front 20

Price Lining

Back 20

Firm with a product line instead of single product may price them at a number of different specific pricing points.
Ex: Dept stores

Front 21

Target Pricing

Back 21

Manufacturer deliberatly adjusting the composition and features of a product to achieve the target price to consumers. They estimate the price they think the people would be willing to pay, then work backwards.

Front 22

Target Pricing

Back 22

Manufacturer deliberatly adjusting the composition and features of a product to achieve the target price to consumers. They estimate the price they think the people would be willing to pay, then work backwards.

Front 23

Bundle Pricing

Back 23

the marketing of two or more products into a single package price.
Ex: Delta Airline offers vacation packages including air/car rental/hotel

Front 24

Bundle Pricing

Back 24

the marketing of two or more products into a single package price.
Ex: Delta Airline offers vacation packages including air/car rental/hotel

Front 25

Yield Manangement Pricing

Back 25

the charging of different prices to maximize revenue for a set amount of capacity at any given time.
Continually matches demand and supply
Ex: airlines, hotels, cruises

Front 26

Yield Manangement Pricing

Back 26

the charging of different prices to maximize revenue for a set amount of capacity at any given time.
Continually matches demand and supply
Ex: airlines, hotels, cruises

Front 27

Cost Oriented Pricing Approach

Back 27

Price setter stresses cost side of pricing, not the demand. Looks at production/marketing costs then add in direct expenses, overhead, and profit.

Front 28

Cost Oriented Pricing Approach

Back 28

Price setter stresses cost side of pricing, not the demand. Looks at production/marketing costs then add in direct expenses, overhead, and profit.

Front 29

Cost Oriented Pricing Approach (Standard Markup Pricing)

Back 29

Adding a fixed % to the cost of all items in a specified product class
>>High volume products have smaller markups than low volume
>>Good when, impossible to estimate demand across a variety of items
>>Ex: Krogers

Front 30

Cost Oriented Pricing Approach (Standard Markup Pricing)

Back 30

Adding a fixed % to the cost of all items in a specified product class
>>High volume products have smaller markups than low volume
>>Good when, impossible to estimate demand across a variety of items
>>Ex: Krogers

Front 31

Cost Oriented Pricing Approach (Cost Plus Pricing)

Back 31

Summing the total unit cost of providing a product and adding a specific amount to the cost to arrive.
>Cost plus percentage of cost pricing: a fixed % is added to the total unit costs (Used for one of a kind items)
>Cost plus fixed-fee pricing: a supplier is reimbursed for all costs, but is allowed only a fixed fee as profit that is independent of final cost of the project (Used for buying highly technical few kinds of products)
>

Front 32

Cost Oriented Pricing Approach (Experience curve pricing)

Back 32

Based on the learning effect - the unit cost of many products/services declines by 10-30% each time a firm's experience at producing and selling them doubles.

Front 33

Profit Oriented Pricing Approaches

Back 33

Targeting specific dollar volume of profit or expressing this target profit as percentage of sales or investment

Front 34

Profit Oriented Pricing (Target profit pricing)

Back 34

Specific dollar volume of profit

Front 35

Profit Oriented Pricing Approaches (Target return on-sales pricing)

Back 35

set typical prices that will give them a profit that is a specified percentage

Front 36

Profit Oriented Pricing Approaches (Target return-on-investment pricing)

Back 36

method of setting prices to achieve this target, uses computerized spreadsheets, managers study realism.

Front 37

Competition Oriented Pricing Approaches

Back 37

Price setter stresses what "the market" is doing

Front 38

Competition Oriented Pricing Approaches (Customary pricing)

Back 38

Used when tradition, standarized channel of distribution, or other competitive factors dictate the price

Front 39

Competition Oriented Pricing Approaches (Above, at, or below market price)

Back 39

Managers have a subjective feel for the competitors price and use that benchmark to choose strategy.
>Above market - rolex
>At market - large dept stores
>Below market - retailers offering private brands

Front 40

Competition Oriented Pricing Approaches(Loss leader pricing)

Back 40

For a special pormotion retail stores deliberatly sell a product below its customary price to attract attention to it.

Front 41

Price war

Back 41

involves successive price cutting by competitors to increase or maintain their unit sales or market share

Front 42

Consider price cutting when:

Back 42

Company has a cost or technological advantage over comp
Primary demand for a product class will grow if prices are lowered
Price cut is confined to certain products/customers, not across the board.

Front 43

Discounts (Noncumulative)

Back 43

based on the size on a single purchase order, encourages large individual purchase orders, not a series.

Front 44

Discount (Cumulativ)

Back 44

apply to the accumulation of purchases of a product over time)

Front 45

Geographical adjustments

Back 45

Made by manufacturerer to list quoted prices to reflect the cost of transportation of the products from seller to buyer.

Front 46

FOB Origin Pricing

Back 46

Free on board- seller pays the cost of loading the product onto the vehicle that is used. Buyers farthest from seller pay highest price

Front 47

Uniform Delivered Pricing

Back 47

the price the seller quotes includes all transportation costs

Front 48

Price fixing

Back 48

Conspiracy among firms to set the prices for a product

Front 49

Sherman Act

Back 49

Prohibits horizontal price fixing and predatory pricing

Front 50

Fed Trade Commission Act

Back 50

Prohibits predatory, deceptive, and geographical pricing

Front 51

Horizontal price fixing

Back 51

when two or more competitors set prices

Front 52

Vertical price fixing

Back 52

controling agreements bt independent buyers and sellers

Front 53

Robinson-Patman Act

Back 53

Prohibits price discrimination, the practice of charging different prices to different buyers.

Front 54

Predatory pricing

Back 54

the practice of charging a very low price for a product with the intent of driving competitors out of business.

Front 55

Geographical pricing

Back 55

basing point pricing