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mktg final Ch 11

Marketing final Ch 11

QuestionAnswer
price the assignment of value, or the amount the consumer must exchange to receive the offering
steps to price the product 1.develop pricing objectives 2.estimate demand 3.determine costs 4.evaluate the pricing environment 5.choose a pricing strategy 6.develop pricing tactics
developing price objectives - supports broader objectives sales/mktg obj-maximize sales/marketing share. profit obj-focus on profit margin/target growth-critical for fads.competitive obj-have effect on comp's efforts.cust satis obj-profits from happy customers.image enhance obj-price inference-quality prestige
how to estimate demand (the steps) -identify number of buyers for their product - multiply that estimate times the avg number each consumer will purchase - predict companys market share - estimaed demand is the share of the whole (estimated) pie
price elasticity of demand the percentage change in unit sales that results from a percentage change in the price - % change quantity demanded/% change price - indicates that changes in price usually cause demand to stretch or retract
elastic vs inelastic demand demand in which changes in price have large effects on the amount demanded, >1 using formula : demand in which changes in price have little or no effect on the amount demanded, <1 using formula
cross-elasticity of demand when changes in the price of one product affect the demand for another item
variable cost vs. fixed cost the costs of production that are tied to and vary depending on the number of units produced. costs of production that do not change with the number of units produced
break-even analysis a method for determining the number of units that a firm must produce and sell at a given price to cover all its costs
what does evaluating the pricing environment involve? looking for a competitive advantage, taking into account economic conditions, how competition will respond, consumer trends
oligopoly vs monopolistic competition vs pure competition: how it affects pricing mrkt has few sellers, many buyers (airlines) all pricing is similar. many sellers offer diff products (restaurants) each firm prices own products w/out concern for comp price. market price determ by demand & supply, do not raise/lower price (farmers)
pricing strategies based on cost cost-based strategies are simple to calculate and relatively risk-free - dont consider nature of target market, demand, competition, PLC, and product image - cost-plus pricing
cost-plus pricing a method of setting prices in which the seller totals all the costs for the product and then adds an amount to arrive at the selling price
price strategies based on demand demand-based- estimates of demand @ diff prices, consumer surveys, field experiments, etc. target costing- kinda works backwards, what cust are willing to pay, then make product cheaper. yield mngmnt- airlines, hotels - changing price for different cust
pricing strategies based on the competition price leadership- when 1 firm 1st sets price and other firms follow, usually the rule for oligopolistic industry, provides legal way for firms to coordinate rates (collusion is illegal)
pricing strategies strategies based on cost - cost-plus pricing, strategies based on the competition - price leadership strategies based on demand - target costing and yield mngmt pricing, based on needs- EDLP, New product pricing - skimming, penetration and trial pricing
pricing strategies based on customer needs EDLP - value pricing - every day low pricing - a pricing strategy in which a firm sets prices that provide ultimate value to customers
new-product pricing when a new product is on the market, marketers use skimming price, penetration price strategy, and trial pricing
skimming price a very high, premium price that a firm charges for its new, highly desirable product
penetration pricing a pricing strategy in which a firm introduces a new product at a very low price to encourage more customers to purchase it. *barrier to entry* discourages competitors
trial pricing pricing a new product low for a limited period of time in order to lower the risk for a customer
Created by: bernabell24
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