Chapter 8- Pricing

Question 1

what are the three pricing methods?

Answer 1

1. competitor oriented
2. cost based
3. marketing led

Question 2

what are the three forms of competitor-oriented pricing?

Answer 2

-where firms follow the prices charged by leading competitors
-where producers take the going-rate price
-where contracts are awarded through a competitive bidding process

Question 3

what is market-led pricing?

Answer 3

to set a price, one estimates the product value to the customer

Question 4

what are 3 methods of estimating value to the customer?

Answer 4

-trade-off analysis
-experimentation
-economic value to the customer analysis (EVC)

Question 5

what is positioning strategy?

Answer 5

the choice of target market and the creation of a differential advantage

Question 6

what is psychological pricing?

Answer 6

the careful manipulation of the reference prices that consumers carry in their heads.

Question 7

what are the four strategic objectives relevant to pricing?

Answer 7

-build objective
-hold objective
-harvest objective
-reposition objective

Question 8

what is price escalation?

Answer 8

a number of factors may combine to put pressure on the firm to increase the prices it charges in other countries

Question 9

circumstances of price increases:

Answer 9

-market research (higher value placed on product)
-rising costs
-excess demand
- harvest objective

Question 10

circumstances of price decreases:

Answer 10

-price is high compared with the value that customers place on a product
-adoption of a build objective
-customers are thought to be price sensitive

Question 11

price tactics for price rises:

Answer 11

-escalator clauses
-price unbundling

Question 12

what are escalator clauses?

Answer 12

The contracts for some organizational purchases are drawn up before the product is made

Question 13

what is price unbundling?

Answer 13

allows each element in the offering to be priced separately in such a way that the total price is raise

Question 14

price tactics for price falls:

Answer 14

-introduction of a fighter brand
-price bundling
-discount terms

Question 15

when to follow price rises:

Answer 15

-General rising cost levels or industry-wide
excess demand
-The pressure to raise prices is the same on
all parties
-Customers are relatively price insensitive
-Brand image is consistent with high prices
-Pursuing a harvest or hold objective

Question 16

when to ignore price rises:

Answer 16

-Costs are stable or falling
-Excess supply
-Incompatibility with their brand image
-Pursuing a build objective
-Costs are stable or falling
-Excess supply
-Incompatibility with their brand image
-Pursuing a build objective