Week 6 - Price Flashcards

Question

Cost-based pricing (Cost-plus pricing)

Answer 1

often used when it is difficult or impossible to determine the costs of the product until it has been made or completed Selling Price = Cost + (Cost × Markup Percentage)

Answer 2

Used by wholesalers and retailers and involves adding a percentage of their purchase cost to determine the resale price Resale Price=Purchase Cost×(1+Markup Percentage)

Answer 3

Costs established a price floor (minimum), below which prices are not sustainable for a for-profit organisation Price floor is something that can introduced by the government.

Answer 4

If priced near the cost, a product is called a price leader

Answer 5

If priced below the cost, a product is called a loss leader

Answer 6

A break-even analysis determines the volume of unit sales at which total costs equals total revenue. This is known as the break-even point. (BEP) The Quantity at which Total Revenue = Total Cost Firms start making profit after the BEP Price x Quantity = Total Fixed Cost + Total Variable Cost

Answer 7

BEP = Fixed Cost / (Unit Price - Unit Variable Cost) Fixed cost = What has to be paid Unit Price = What the product is selling at Unit variable cost = how much of the materials was used

Answer 8

BEP = (500+200+300) / (15-5) = 1000 / 10 BEP = 100 pizzas

Answer 9

Understanding the effect on costs and revenue when a company produces and sells one more unit of product Can be useful in pricing individual units of output or to individual buyers

Answer 10

Profit is maximised by selling the quantity at which marginal cost equals marginal revenue Marginal analysis requires detailed data on actual and estimated costs and revenues at all volumes and prices.

Answer 11

involves setting prices based on the prices charged by competitors Competition-Based Pricing serves to ensure that an organisation maintains its sales volumes and market share, but does not guarantee profitability In price-sensitive industries, organisations monitor their competitors’ prices on a daily or even more frequent basis.

Answer 12

The likely response of competitors to the organisation’s pricing will in part, be determined by the competitive structure of the industry - Oligopoly - Monopoly - Perfectly competitive

Answer 13

Organisations with a strategy of differentiation of their products, such as uniqueness, quality, brand, image or service When it is feasible, non‐price competition is clearly preferable to price competition as it gives the organisation greater power to decide on the profit margin per unit sold

Answer 14

It is marketing relationships between suppliers and organisational buyers that tend to be close, long term and formal in nature Pricing is often more complex and open to negotiation in business markets than the consumer market

Answer 15

Organisation will only choose to deal with intermediaries who can add value to the organisation's offering Most producers recommend a final retail price tat consumer should pay but each intermediary needs to make profit To ensure the profitable operation of the various partners involved in getting products from the produce to the consumer or organisational buyer, various discounts apply to transactions in business markerts

Answer 16

It is the consumer purchasing behaviour that is usually based on a rational evaluation of the value of a product varying between individual consumers An essential indicator of the importance of price in consumers’ purchasing decisions is the perceived uniqueness or differentiation of the product. Different market segments will have varying levels of sensitivity to price

Answer 17

A method that uses a low launch price below the market price to gain: maximum sales volume rapid market share turnover of a new product

Answer 18

Charging the highest price that the customer who most desires the product is willing to pay Over time, the price is lowered to bring in larger numbers of buyers, again at the highest prices that these buyers are willing to pay.

Answer 19

The practice of charging different buyers different prices for the same (or equivalent) product. e.g. student discounts, senior citizen discounts

Answer 20

Links discounted prices across an organisation’s entire range with some special or seasonal event. e.g. End-of-season sales, Christmas sales, black friday

Answer 21

Pricing strategy combined with promotional activities to attract customers and drive short-term sales. e.g. Flash sales, Buy-1-get-1-free, coupon codes

Answer 22

Once implemented, the price must always be monitored as factors can change over time (Demand, customer perceived value, cost of production, competitors price, market conditions, regulatory and legal, product life cycle) Pricing is perhaps the most flexible element of the marketing mix. This flexibility ensures that pricing is the most dynamic and volatile element of the marketing mix. The internet has made prices more visible, more flexible and, consequently, more competitive than ever before

Week 6 - Price Flashcards

(46 cards)