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21 Cards in this Set
- Front
- Back
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What is price?
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Price – the amount of money charged for a product or service. Price is the only element in the marketing mix that produces revenue, all other elements represents costs. Pricing should be treated as a tool for creating and capturing customer value.
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Explain which three factors to consider when setting prices.
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- Price ceiling is the customer perception of value, and there are no demands above this price
- Other internal and external considerations such as marketing strategy, objectives and mix, competitors’ strategies and prices and nature of the market and demand - Price floor: no profits below this price, it is the production costs |
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What is value-based pricing?
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Value-based pricing: uses buyers’ perceptions of value, not the seller’s cost, as key to pricing. Price is considered along with the other marketing mix variables before the marketing program is set.
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What is cost-based pricing?
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Cost-based pricing: is product-driven, and input price comes from calculus and controlling. The company designs a good product and sets the price after
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What is good-value pricing?
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Good-value pricing: offering just the right combination of quality and good service at a fair price
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What is value-added pricing?
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Value-added pricing: attaching value-added features and services to differentiate a company’s offers and thus support higher prices
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Explain the experience curve.
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Experience (learning) curve: the drop in the average per-unit production cost that comes with accumulated production price
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What is cost-plus pricing?
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Cost-plus pricing: adding a standard mark-up to the cost of the product → ignores demand and competitor prices, but still remains popular
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What is break-even pricing?
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Break-even pricing (large profit pricing): setting price to break even on the costs of making and marketing a product, or setting price to make a target profit
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What is target costing?
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Target costing: pricing that starts with an ideal selling price, then targets costs that will ensure that the price is met
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What is pure competition?
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Pure competition: the market consists of many buyers and sellers trading in a uniform commodity such as wheat, copper or financial securities → don’t spend much time on marketing strategy
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What is monopolistic competition?
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Monopolistic competition: many buyers and sellers who trade over a range of prices rather than a single market price. A range of prices occurs because seller can differentiate their offers to buyers’ → uses branding, advertising and personal selling to set their offers apart
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What is oligopolistic competition?
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Oligopolistic competition: few sellers who are highly sensitive to each other’s pricing and marketing strategies
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What is pure monopoly?
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Pure monopoly: one seller that is treated differently priced based on if it is regulated or non-regulated monopoly
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Explain the demand curve.
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Demand curve: a curve that shows the number of units the market will buy in a given time period, at different prices that might be charged.
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Explain price elasticity?
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Price elasticity: a measure of the sensitivity of demand to changes in price.
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What is market-skimming pricing?
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Market-skimming pricing: setting a high price for a product to skim maximum revenues layer by layer from the segments willing to pay the high price; the company makes fewer but more profitable sales
→ the product must support the higher prices and it has to be a market that is hard to enter for competitors → Sony and Samsung |
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What is market penetration pricing?
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Market penetration pricing: setting a low price for a new product in order to attract a large number of buyers and a large market share
→ the market must be highly price-sensitive so that a low price procedures more market growth, production and distribution costs must fall as sales volume increases, the low price must help to keep out the competition |
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What is product line pricing?
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Product line pricing: setting the price steps between various products in a product line based on cost differences between the products, customer evaluations of different features and competitors’ prices
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What is optimal-product pricing, captive-product pricing, by-product pricing and product bundle pricing?
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Optional-product pricing: offering to sell optional or accessory products along with their main product
Captive-product pricing: making products that have to used along with the main product By-product pricing: the company seeks a market for by-products to help offset the costs of disposing them and help the market price of the main product more competitive Product bundle pricing: sellers combine several of their products and offer the bundle at a reduced price |
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Describe seven price-adjustment strategies.
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- Discount and allowance pricing: reducing prices to reward customer responses such as volume purchases or promoting the product
- Segmented pricing: adjusting prices to allow for differences in customers, products or locations - Psychological pricing: adjusting prices for a psychological effect - Promotional pricing: temporarily reducing prices to increase short-term sales - Geographical pricing: adjusting prices to account for the geographic location of customers - Dynamic pricing: adjusting prices continually to meet the characteristics and needs of individual customers and situations - International pricing: adjusting prices for international markets |
