module 9 Flashcards
(37 cards)
What are the six elements of Pricing decisions?
Establish pricing objectives and related strategies
Select pricing tactics
Set the exact price
Determine channel discounts and allowances
Execute price changes
Understand legal considerations in pricing
What is penetration pricing strategy?
To gain as much market share as possible
What is the main objective of Penetration pricing?
Attract customers to a new product/service by offering a lower price during its initial offering
What should marketers be wary about Penetration pricing strategy?
Price is a cue for developing customer perceptions of product quality, the value proposition may be reduced if a low price belies the products actual quality attributes. It creates confusion about positioning and brand image.
What is the objective of Price skimming strategy?
Entering a market at a relatively high price point.
marketing managers usually are convinced that a strong price-quality relationship exists for the product
List at least four important features of Price skimming strategy?
There are enough prospective customers willing to buy the product at a high price
The high price does not attract competitors
Lowering the price would have only a minor effect on increasing sales volume and reducing unit costs
The high price is interpreted as a sign of high quality
What is Target return on investment (ROI) pricing strategy? Page
Pricing strategy in which a bottom-line profit is established first and then pricing is set to achieve that target
How is ROI calculated?
Subtracting the initial value of the investment from the final value of the investment(which equals the net return) then dividing this new number (net return) by the cost of investment, then multiply by 100
What is the basic price elasticity equation
The measure of customers price sensitivity estimated by dividing relative changes in quantity sold by relative changes in price (see study guide)
What is Competitor-based pricing strategy?
A firm decides to price at some market average price in context with prices of competitors
What is Stability pricing?
A firm attempts to find a neutral set point for price that is neither low enough to raise the ire of competition nor high enough to put the value proposition at risk with customers.
What is Value Pricing?
A firm attempts to take into account the role of price as it reflects the bundle of benefits sought by the customer.
Product line pricing
A firm affords the marketing manager an opportunity to develop a rational pricing approach across a complete line of related items.
Captive pricing or Complementary pricing
Gaining a commitment from a customer to a basic product or system that requires continual purchase or peripherals to operate
Price bundling
Customers are given the opportunity to purchase a package deal at a reduced price
Reference pricing
Firm gives customers comparative prices when considering purchase of a product so they are not viewing a price in isolation from prices of other choices.
Prestige pricing
Lends prestige to a product or brand by virtue of a price relatively higher than the competition
Odd pricing and Even pricing
Odd pricing: in which the price is not expressed in whole dollar increments
Even pricing: price is expressed in whole-dollar increments.
One-price strategy
A pricing tactic in which the price marked on a good is what it typically sells for.
Variable pricing
A pricing tactic in which customers are allowed or encouraged to haggle about prices.
Everyday low pricing:
A pricing tactic that entails relatively low, constant prices and minimal spending on promotional efforts.
High/low pricing:
A pricing strategy in which the retailer offers frequent discounts, primarily through sales promotions, to stated regular prices.
Auction pricing
A pricing tactic in which individuals competitively bid against each other and the purchase goes to the highest bidder.
Cost-plus pricing:
Building a price by adding standardized markup on top of the costs associated with the offering.
