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Pricing
Pricing strategy
| Question | Answer |
|---|---|
| Robinson-Patman Act | Federal legislation prohibiting price discrimination in sales to wholesalers, retailers, and other producers |
| Price Discrimination | Some customers pay more than others for the same product. |
| Unfair-Trade laws | Requires sellers to maintain a minimum prices for comparable merchandise. |
| Fair-Trade laws | This allows manufacturers to stipulate minimum retail prices for their products and to require dealers to sign contracts agreeing to abide by these prices |
| Identify major pricing objective | Profitability, volume, competitive, prestige and not-for-profit objectives |
| Profitability objective | The purpose of this objective is profit maximization and target-return objective |
| Profit maximization | Point at which the additional revenue gained by increasing the price of a product equals the increase in total costs |
| Volume objective | The purpose of this objective is sales maximization and increase in market share. |
| Competitive objective | This objective seeks simply to meet competitors prices. |
| Identify four types of market structure in which businesses operate | Pure competition, monopolistic competition, Oligopoly, Monopoly |
| Pure competition | A market structure with so many buyers and sellers that no single participants can significantly influence price |
| Monopolistic competition | A market structure that typifies most retailing and features large numbers of buyers and sellers. There is some control over prices by the seller. |
| Oligopoly | This market structure has relatively few sellers. Pricing decisions are likely to affect the market. |
| Monopoly | The market structure in which only one seller of a product exists. The seller has complete control on price. |
| Skimming pricing strategy | Also called Market-plus strategy that involves the use of high price relative to competitive offerings. Profit maximization is an objective for this strategy |
| Penetration pricing strategy | Also called market-minus strategy that involves the use of a relatively low entry price compared with competitive offerings,based on this theory initial low price will help secure market acceptance. |
| Competitive pricing | Pricing strategy designed to deemphasize price as a competitive variable by pricing a good or service at the general level of comparable offerings |
| Quantity discount | Price reductions granted for large-volume purchases. Discounts can be cumulative or non-cumulative |
| Cumulative quantity discount | Discounts determined by purchases over stated time periods. E.g Annual purchases of at least $5000/- might entitle buyer to a 2% discount and purchases exceeding $10,000/0 would entitle buyer to a 5% discount |
| Non Cumulative discount | Provide one time reductions in the list price. Firms might offer discounts on number of units purchased e.g for 1 unit list price is $500/-, 2-5 units list price is 2% less, 6-10 units, discount is 10%. |
| Allowances | Specified deduction from list price including trade-in or promotional allowance. |
| Standard world wide pricing | This international pricing strategy can succeed if foreign marketing costs remain low this strategy works well. . |
| Market differentiated pricing strategy | This international pricing strategy is a flexible arrangement to set prices according to local market conditions. Marketers needs to have accurate market information |
| Dual pricing strategy | In this international pricing strategy is prices are separate for domestic and export sales. Some exporters practice cost-plus pricing strategy where they can allocate their domestic and foreign costs to product sales in those markets. |
| Price escalation | This is global pricing strategy where there is disproportionate difference in price between exporting and importing countries . |
| Transfer pricing | This is a global pricing problem that often times occurs in large companies. What pricing tactics will companies utilize for moving goods between profit centers ( departments to which revenue and costs can be assigned) |
| Grey Marketing | Because of the different prices in different country markets, a product sold in one country may be exported to another country and undercut the prices charged in that country. |
Created by:
mkale
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