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chapter 9 marketing
Pricing- Understanding and Capturing Customer Value
| Question | Answer |
|---|---|
| Price | The amount of money charged for all product and services or the sum of all the values that customers give up in order to gain benefits of having or using a product or service. |
| Value-based pricing | Setting price based on buyers perceptions of value rather than sellers cost. |
| Good value pricing | Offering just the right combination of quality and good service at a fair price. |
| EDLP | Charging it constant everyday low price with few or no temporary price discounts. |
| High-low pricing | Involves charging high prices on everyday basis but running frequent promotions to lower prices temporarily on selected items. |
| Pricing power | Its power to escape price competition and to justify higher prices and margins with out losing market share. |
| Value-added pricing(Better) | Attaching value added features work and services to differentiate a market offering and support higher prices, rather than cutting prices to match competitors |
| Cost-based pricing | Involve setting Prices based on the cost for producing and distributing and selling the product, plus a fair rate of return for its effort and risk. |
| Fixed-costs(overhead) | Are costs that do not veery with production or sales level. (Example.Rent, heat, interest, or salaries) |
| Variable costs | Cost that vary directly with the level of production. The total varies with the number of units produced. |
| Total costs | Sum of the fixed and variable costs for any given level of production. |
| Competitor disadvantage | If it cost the company more than competitors to produce and sell its products. The company will need to charge higher prices or make less profit. |
| Cost-plus pricing(Simplest form) | Adding a standard markup to the cost of the product. |
| Break-even pricing(Target profit pricing) | Setting price to break even on the cost of making and marketing a products, or setting price to make a target profit. |
| Customers perception of value | Sets the upper limit for prices. Cost sets lower limit for prices. |
| Target costing(potent strategic weapon) | Pricing and starts with an ideal selling price than targets costs that will ensure that the price is met. |
| 4 types of pricing markets | 1.)Pure competition2.)monopolistic competition 3.)oligopolistic competition 4.)pure monopoly |
| Pure competition | Market consists of many buyers and sellers trading in a uniform commodity such as wheat copper or financial securities. No single buyer or seller has much effect on the going market price. |
| Monopolistic competition | Market consists of many buyers and sellers who trade over a range of prices rather than a single market price. A range of prices occurs because sellers can differentiate their offers to buyers. |
| Oliopolistic competition | Market consists of a few sellers who are highly sensitive to each other's pricing and marketing strategies. There are few sellers because it is difficult for new sellers to enter the market |
| Pure monopoly | Market consists of one seller. The seller may be government monopoly.(Example the U.S. Postal Service) |
| Nonregulated monopoly | Free to price at what the market can bear. However they do not always charge the full price for a number of reasons: the desire not to attract competition, desire to penetrate the market faster with a low price, or a fear of government regulation. |
| Demand curve | A curve that shows the number of units the market will buy in a given time-period, at different prices that might be changed. |
| Consumers think higher prices mean | Higher-quality |
| Price elasticity | A measure of sensitivity of demand to changes in price. Demand changes greatly. |
| Price inelastic | Demand hardly changes with a small change in price. |
| Market-skimming pricing(price skimming) | Setting a high price for a new product to skim maximum revenues, layer by layer from the segments willing to pay the high price the company makes fewer but more profitable sales. |
| Market penetration pricing | Setting a low price for a new product in order to attract a large number of buyers and a large market share. |
| Product mix pricing strategies | 1.) Product line pricing2.) Optional-product pricing3.) Captive-product pricing4.) By-product pricing5.) Product bundle pricing |
| Product line pricing | Setting the price steps between products in a product line based on cost differences and customer perceptions of value. |
| Optional product pricing | The pricing of optional or accessory products along with the main product. |
| Captive product pricing | Setting a price for products that must be used along with a main product. |
| By product pricing | Setting a price for by-products in order to make of the main products price more competitive. Have no value in getting rid of them is costly. |
| Product bundle pricing | Combining several products and offering a bundle at a reduced price. (Example. All-inclusive vacations and Time Warner all in one package) |
| price adjustment strategies | 1.) Discount and allowance pricing2.) Segmented pricing3.) Psychological pricing4.) Promotional pricing5.) Geographical pricing6.) Dynamic pricing7.) International pricing |
| Discounts | A straight reduction in price on purchases, under stated conditions or during a stated period of time. |
| Allowance | Promotional money paid by manufacturers to retailers in return for an agreement to feature the manufacturers product in some way. |
| Segmented pricing(revenue management) | Selling a product or service in two or more prices were the difference in price is not based on the difference in costs. |
| Psychological pricing | Adjusting prices that considers the psychology of prices simply the economics; the price is used to say something about the product.(Using price to judge quality) |
| Reference prices | Prices that buyers carry in their minds and referred to when they look at a given product. |
| Promotional pricing | Temporarily pricing products below the list price, and sometimes even below cost to increase shorten sales. (Example. Low interest financing, longer warrantees, free maintenance, cash rebates) |
| Geographical pricing | Setting prices based on buyer's geographic locations. The company must decide how to price its products for customers located in different parts of the country or world. |
| FOB-origin pricing | Free On Board |
| Dynamic pricing | Adjusting prices continually to meet the characteristics and needs of individual customers & situations. (Example. Internet pricing) |
| Price-fixing(Illegal) | States that sellers must set prices without talking competitors. |
| Predatory pricing | Selling below cost with the intention of punishing a competitor or gaining higher long-run profits by putting competitors out of business. Only selling below cost to drive the competitors is considered predatory practices. |
| Robinson-Patman Act | Seeks to prevent unfair price discrimination by ensuring that sellers offer the same price terms to customers at a given level of trade. |
| Price confusion | Results when firms employ pricing methods that make it difficult for customers to understand just what they are really paying. |
| Deceptive pricing | Occurs when a seller states prices or price savings that mislead consumers or are not actually available to consumers. |
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