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Elements of Pricing Decisions
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D174 Module 9
Pricing Strategy
| Question | Answer |
|---|---|
| Cost Leadership | A marketing strategy in which a firm utilizes its core cost advantages to gain an advantage over competitors due to flexibility in pricing strategies as well as its ability to translate cost savings to the bottom line. |
| Elements of Pricing Decisions | Establishing Pricing objectives and related strategies, Select pricing tactics, Set exact price, Determine channel allowances/discounts, Execute price changes, Understand legal considerations in pricing |
| Pricing Objectives | The desired or expected results associated with a pricing strategy that is consistent with other marketing-related objectives. |
| For pricing objective -Market share maximization what is the relevant pricing strategy | Penetration strategy |
| Objective: Market entry at the highest possible initial price what is the relevant pricing strategy | Price skimming |
| Objective: Profit maximization what is relevant pricing strategy | Target ROI |
| Objective: Benchmark the competition what is relevant pricing strategy? | Competitor-based pricing |
| Objective: Communicate positioning through price what is the relevant pricing strategy? | Value Pricing |
| Market share | The percentage of total category sales accounted for by a firm. |
| Penetration pricing | A pricing strategy in which a firm’s objective is to gain as much market share as possible. |
| Price skimming | A pricing strategy in which a firm enters a market at a relatively high price point, usually in an effort to create a strong price-quality relationship for the product. |
| Target Return on Investment (ROI) | A pricing strategy in which a bottom-line profit is established first and then pricing is set to achieve that target. |
| Price elasticity of demand | The measure of customers’ price sensitivity, estimated by dividing relative changes in quantity sold by relative changes in price. |
| Competitor based pricing | A pricing strategy in which a firm decides to price at some market average price in context with prices of competitors. |
| Price war | When a company purposefully makes pricing decisions to undercut one or more competitors and gain sales and net market share. |
| Stability pricing | A pricing strategy in which 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. |
| Value pricing | A pricing strategy in which 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 (price lining) | A pricing tactic in which a firm affords the marketing manager an opportunity to develop a rational pricing approach across a complete line of related items. |
| captive pricing (complementary pricing) | A pricing tactic of gaining a commitment from a customer to a basic product or system that requires continual purchase of peripherals to operate. |
| Price bundling | A pricing tactic in which customers are given the opportunity to purchase a package deal at a reduced price compared to what the individual components of the package would cost separately. |
| Reference pricing | A pricing strategy in which a 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 | A pricing tactic that lends prestige to a product or brand by virtue of a price relatively higher than the competition. |
| Odd pricing | A pricing tactic in which the price is not expressed in whole dollar increments. |
| Even pricing | A pricing tactic in which the price is expressed in whole-dollar increments. |
| Psychological pricing | Creating a perception about price merely from the image the numbers provide the customer. |
| 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. |
| EDLP Every Day Low price | 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. |
| Reverse auctions | When sellers bid prices to buyers and the purchase typically goes to the lowest bidder |
| Cost plus pricing/Mark up pricing | Building a price by adding standardized markup on top of the costs associated with the offering. |
| Mark up on sales pricing | Using the sales price as a basis for calculating the markup percentage. |
| Average cost pricing | A pricing decision made by identifying all costs associated with an offering to come up with what the average cost of a single unit might be. |
| Target return pricing | A pricing decision made by considering fixed and variable costs and then demand forecasting to determine the price per unit. |
| Allowances | A remittance of monies to the consumer after the purchase of the product. |
| Trade discounts | An incentive to a channel member for performing some function in the channel that benefits the seller. |
| Discounts | Direct, immediate reductions in price provided to purchasers. |
| Cash Discounts | A percentage discount off invoice to elicit quicker payment by the customer. |
| Quantity discounts | Discounts taken off an invoice price based on different levels of product purchased. |
| Seasonal discounts | Discounts that reward the purchaser for shifting part of the inventory storage function away from the manufacturer. |
| Promotional allowances | Sales promotions initiated by the manufacturer and carried out by the retailer, who is then compensated by the manufacturer. |
| FOB (free on board) | Determination of title transfer and freight payment based on shipping location. |
| Uniform delivered pricing | When the same delivery fee is charged to customers regardless of geographic location within a set area |
| Zone pricing | When shippers set up geographic pricing zones based on the distance from the shipping location. |
| just noticeable difference (JND) | The amount of price increase that can be taken without impacting customer demand. |
| Price fixing | When companies collude to set prices at a mutually beneficial high level. |
| Price discrimination | When a seller offers different prices to different customers without a substantive basis, such that competition is reduced. |
| Deceptive pricing | Knowingly stating prices in a manner that gives a false impression to customers. |
| Bait and Switch | When a seller advertises a low price but has no intent to actually make the lower-priced item available for sale. |
| Fair Trade laws | Laws designed to allow manufacturers to establish artificially high prices by limiting the ability of wholesalers and retailers to offer reduced or discounted prices. |
| Minimum mark up laws | Laws that require retailers to apply a certain percentage of markup to their products for sale. |
| Loss leader products | Products sacrificed at prices below costs in an effort to attract shoppers to the retail location. |
Created by:
mkale
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