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Marketing > Chapter 6: Price > Flashcards

Chapter 6: Price Flashcards

0
Q

Who determines price?

A

Manufacturer

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1
Q

What is price?

A

Money exchanged
For ownership of product
Use of service

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2
Q

What is value?

A

The quantitive measure of worth

Of a product in exchange for something else

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3
Q

What is the equation for value?

A 
   Cost
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4
Q

How is the firm affected with pricing?

A

Profits

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5
Q

What is profit?

A

Sales- Cost

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6
Q

What is sales?

A

Quantity x price

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7
Q

What is cost?

A

Payment for
Materials/services
To produce final goods and services
To generate revenues

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8
Q

What are the components of total cost?

A

Fixed

Variable

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9
Q

What is fixed cost?

A

Constant Amount firm must pay

Regardless of output

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10
Q

What is variable cost?

A

Incurred in relation to production

Usually direct relation

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11
Q

What are the categories for product cost?

A

Direct

Indirect

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12
Q

What are examples of direct product cost?

A

Raw materials
Components/manufactured parts
R and D
Production workers labor costs

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13
Q

What are examples of indirect product costs?

A

Factory overheads
Finance expenses
Administration expenses
Marketing and selling cost

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14
Q

What is the goal of marketing in value?

A

To increase value

So that product becomes more inelastic

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15
Q

What is price elasticity of demand?

A

% change in quantity demanded relative to

% change in price

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16
Q

What are the factors affecting price elasticity?

A

Availability of substitutes
Necessities and frequency of use
Proportion of disposable income

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17
Q

How elastic are convenience goods? Why?

A

Elastic

Available substitutes

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18
Q

The two strategies is setting initial prices for new products are

A

Skim pricing

Penetration pricing

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19
Q

What products skim pricing is used for?

A

Specialty

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20
Q

What does skim pricing start with ?

A

A high price

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21
Q

What are the characteristics of the first layer of customers in price skimming?

A

Really desire product

Not price elastic

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22
Q

In price skimming, when do we go to the next layer?

A

Demand of precious later met

23
Q

In price skimming, when we go to the successive layers, price is lowered because

A

Customers are more price sensitive

24
Price skimming stops when
No other layers would pay a higher price
25
When is price skimming effective?
High quality image for product Product genuinely distinctive Enough customers willing to buy initial price No competition (protection) The product is in early stage of life cycle
26
Why do customers have a high quality image of product in skim pricing?
High price= high quality
27
The first layer of customers in skim pricing is important because they
Make sales profitable
28
How is a new product protected from competition?
Barrier to entry | Patent
29
Why are competitors avoided in skim pricing?
They can set lower prices
30
Why is skim pricing used in early stages of product?
Because a low price will not generate greater revenue Not many aware of product Those aware are price inelastic
31
What is penetration pricing?
Set a low initial price on the new product | Appeal immediately to the mass market
32
For what goods is penetration pricing used?
Convenience | Shopping
33
Penetration pricing is used for convenience and shopping goods because
It is easily copied | Imitative
34
When is penetration strategy effective?
Can reach the mass market easily Discourage competitions from entering the market Product highly elastic demand Economies of scale
35
What happens when the mass market is quickly reached in penetration strategy?
Sales volumes substantial | Establish substantial market share
36
How can companies using penetration strategy reduce competition?
Reason that lower prices mean lower profit margin Lower price means high sales volume For existing companies
37
What does economies of scale achieve?
Substantial reductions in unit costs Large scale operations Volume make up for lower profit margin per unit of product
38
What are the price adjustment strategies?
``` Prestige pricing Status quo pricing Price lining Psychological pricing Bundle pricing Loss leader pricing ```
39
Why is price adjusted?
Stage in product life cycle | Market demand conditions
40
What is prestige pricing?
Setting a high price
41
Why do you set a high price in prestige pricing?
Customers conscious about | Status and quality will be attracted
42
What is status quo pricing?
Pricing in line with competitors who sell similar products
43
Why is status quo pricing used?
To avoid a price war | Maintain profits and market share
44
What is price lining?
Setting a range or price points for a line of product Setting a limited number of prices to sell related products
45
What is psychological pricing also known as?
Odd pricing
46
What does psychological pricing involve?
Setting a price at uneven amounts | Few dollars/cents under an even number
47
How does psychological pricing affect?
consumers perceive it as a lower price
48
When should odd pricing be avoided?
On higher priced items
49
When will odd pricing lose its effect?
Overuse
50
What is bundle pricing?
Sale of two or more products in a single package price
51
What are the two products in a bundle?
First product: popular item | Second: less popular
52
How does bundle pricing benefit consumers?
A lower total cost | Do not have to make separate purchases
53
What is loss leader pricing?
Sale of a product at lower than usual price | Attract customers to purchase other items (normal profit margin)
54
What is the aim of loss leader pricing?
Increase sales of other goods Not the product on loss leader
55
What is the difference between bundle pricing and sales promotion?
Bundle is permanent

Marketing (9 decks)

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