Marketing Chapter 14

Front 1

4 Bases for Setting Price Level

Back 1

1.) DEMAND ORIENTED APPROACHES
2.) COST ORIENTED APPROACHES
3.) PROFIT ORIENTED APPROACHES
4.) COMPETITION ORIENTED APPROACHES

Front 2

8 Types of Demand Oriented Approaches

Back 2

Skimming Pricing – The highest initial price that customers really desiring the product are willing to pay.

Penetration Pricing -Setting a low initial price on a new product to appeal immediately to the mass market.

Prestige Pricing - Setting a high price so that status-conscious consumers will be attracted to the product and buy it.

Price Lining - Setting the price of a line of products at a number of different specific pricing points.

Odd-Even Pricing - Setting prices a few dollars or cents under an even number, such at $19.95.

Target Pricing - Manufacturer deliberately adjusting the composition and features of a product to achieve the target price to consumers.

Bundle Pricing - The marketing of two or more products in a single “package” price.

Yield Management Pricing - The charging of different prices to maximize revenue for a set amount of capacity at any given time.

Front 3

3 Types of Cost Oriented Approaches

Back 3

Standard Markup Pricing- Adding a fixed percentage to the cost of all items in a specific product class.

Cost-plus pricing- The practice of summing the total unit cost of providing a product or service and adding a specific amount to the cost to arrive at a price.

Experience curve pricing - A method of pricing based on the learning effect, which holds that the unit cost of many products and services declines by 10 percent to 30 percent each time a firm’s experience at producing and selling them doubles.

Front 4

3 Types of Profit Oriented Approaches

Back 4

Target Profit Pricing - Setting an annual target of a specific dollar volume of profit.

Target Return-on-sales pricing - Setting a price to achieve a profit that is a specified percentage of the sales volume.

Target return on investment pricing - Setting a price to achieve a return-on-investment (ROI) target.

Front 5

3 Types of Competition Oriented Approaches

Back 5

Customary pricing - A method of pricing based on tradition, a standardized channel of distribution, or other competitive factors.

Above, At, or Below market pricing - Pricing based on market price

Loss Leader Pricing - Deliberately selling a product below its customary price to attract attention to it.

Front 6

4 Types of Discounts

Back 6

-Quantity discounts - Reductions in unit costs for a larger order.

-Seasonal discounts – offers discounts to people who buy snow blowers in July and August

-Trade (functional) discounts – to reward wholesalers and retailers for marketing functions the will perform in the future

-Cash discounts – if payment is made within 10 days, 2% discount

Front 7

3 Types of Allowances

Back 7

-Trade in allowances – price reduction given when a used product is part of the payment on a new product

-Promotional allowances - Cash payment or extra amount of “free goods” awarded sellers in the channel of distribution for undertaking certain advertising or selling activities to promote a product.

-Everyday Low Pricing -
(1) The practice or replacing promotional allowances with lower manufacturer list prices.
(2) Retail strategy that emphasizes consistently low prices and eliminates most markdowns

Front 8

3 Types of Geographical Adjustments

Back 8

-FOB origin pricing - A method of pricing where the title of goods passes to the buyer at the point of loading.

-Uniform Delivered Pricing - The price the seller quotes includes all transportation costs.

-Basing Point Pricing - Selecting one or more geographic locations (basing point) from which the list price for products plus freight expenses are charged to buyers.

Front 9

Price Fixing

Back 9

A conspiracy among firms to set prices for a product

Front 10

Price Discrimination

Back 10

The practice of charging different prices to different buyers for goods of like trade and quality.

Front 11

Deceptive Pricing

Back 11

price deals that mislead consumers.

Front 12

Geographical pricing

Back 12

– Basing point pricing can be viewed as illegal if there is clear-cut evidence of a conspiracy to set prices

Front 13

Predatory pricing

Back 13

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