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Pricing
Lecture 3- Exam 3
42
Marketing
Undergraduate 3
05/28/2010

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Cards

Term

Define:

Price

Definition
- the value that customers give up or exchange to obtain a desired product
Term

Define:

Bartering

Definition

- the oldest form of exchange

 

- involves the trading of goods, services, favors, votes, or anything else that has value to the other party

Term
Characteristics of Price
Definition

- most readily changeable characteristic of a product

 

- a key element in the marketing mix because it relates directly to generation of revenues and quantities sold

 

- a key component of the profit equation, having strong effect on the firm's profitability

 

- can have symbolic value to customers - prestige pricing

Term
What are the Factors that Affect Pricing Decisions?
Definition

1. Organizational and Marketing Objectives

2. Pricing Objectives

3. Costs

4. Other Marketing Mix variables

5. Channel Member Expectations

6. customer interpretation and response

7. competition

8. legal and regulatory issues

Term
Name the 3 Types of Pricing Objectives
Definition

1. Profit Oriented

2. Sales Oriented

3. Status Quo Oriented

Term
What are the objectives of Profit Oriented Pricing?
Definition

- target return

 

- maximize profits

Term
What are the objectives of Sales Oriented Pricing?
Definition

- Dollar or Unit Sale Growth

 

- Growth in Market Share

Term
What are the objectives of Status Quo Oriented Pricing?
Definition

- price competition

 

- nonprice competition

Term
What is Price Competition?
Definition

- emphasizing price and matching or beating competitors' prices

 

- effective strategy in markets with standardized products

 

- lowest-cost competitor will sell the most

 

- allows marketers to respond quickly to competitors

Term
What is Nonprice Competition?
Definition

- emphasizing factors other than price to distinguish a product from competing brands

* distinctive product features, services, product quality, promotion, packaging

 

- advantage is in increase brands unit sales without changing price

 

- effective when a product or service's features are difficult to imitate by competitors and customers perceive their value

 

- builds customer loyalty by focusing on nonprice features

Term

Other Factors Affecting Pricing Decisions:

Organizational and Marketing Objectives

Definition
- prices should be set that are consistent with the organization's goals, mission, and marketing objectives
Term

Other Factors Affecting Pricing Decisions:

Costs

Definition

- set a floor price

 

**products must be sold above their costs if the firm is to remain in business

Term

Other Factors Affecting Pricing Decisions:

Other Marketing Mix Variables

Definition

- price/quality image of the product or brand

- selective or intensive product distribution

- product pricing used as a promotional tool

Term

Other Factors Affecting Pricing Decisions:

Customers' Interpretation and Response

Definition

- internal reference price

- external reference price

 

 

Term

Define:

Internal Reference Price

Definition
- price developed in the buyer's mind through experience with the product
Term

Define:

External Reference Price

Definition
- a comparison price provided by others
Term

Other Factors Affecting Pricing Decisions:

Buyers' Responsiveness to Price

Definition

- value consciousness

- price consciousness

- prestige sensitivity

Term
What is Value Consciousness?
Definition
- the consumers concern about price and quality
Term
What is Price consciousness?
Definition
- the consumers always striving to pay low prices
Term
What is Prestige Sensitivity?
Definition
- consumers that are drawn to the prominence and status
Term

Other Factors Affecting Pricing Decisions:

Competition

Definition

- judging competitors' responses to adjusting prices

 

-changes in an industry's market structure cause and create pricing opportunities

Term

Other Factors Affecting Pricing Decisions:

Legal and Regulatory Issues

Definition

- price controls intended to curb inflation

 

- controls that set/regulate prices for specific products

 

- regulations and laws to prohibit price fixing, and deceptive and discriminatory pricing

Term

Other Factors Affecting Pricing Decisions:

Channel Member Expectations

Definition

- to make a profit at least equivalent to the potential profit from handling a competitor's brand

 

- to earn a profit commiserate with the effort and resources the channel member expends on the product

 

- to receive discounts for volume purchases and prompt payment

 

- to be supported by the producer with training, advertising, sales promotion, and return policies

Term

Discount Policies:

Quantity

Definition

- the customer pays less per unit

 

- encourages volume buying

Term

Discount Policies:

Seasonal

Definition
- price reductions given to buyers for purchasing goods or services out of season
Term

Discount Policies:

Cash

Definition

- reductions to encourage buyers to pay quickly

 

*2/10 net 30 - 2% off the price if the invoice is paid in 10 days, with the net due within 30 days, and an additional interest charge after 30 days

Term

Discount Policies:

Trade

Definition

- reductions in list price given to channel members that perform one or more marketing functions for the producer

 

- extend credit, provide transportation, etc.

Term

Discount Policies:

Temporary

Definition
- sale prices reduce list prices temporarily to encourage immediate buying; they can condition buyers and sellers to shop for sales and may erode brand loyalty
Term

Allowance Policies:

-Advertising

Definition

- price reductions given to firms in the channel to encourage them to advertise or otherwise promote the supplier's products locally

 

- they exchange money for local ad support

Term

Allowance Policies:

Stocking

Definition

- also called slotting allowances

 

- given to middlemen to get attention and shelf space for a product

Term

Allowance Policies:

Trade-In

Definition
- price reductions for used products when similar new products are bought
Term

Allowance Policies:

- Push Money

Definition
- incentives for retail salesclerk to aggressively push specifically targeted items
Term
Name the 5 Pricing Strategies
Definition

- Differetial Pricing

- New-Product Pricing

- Product-line Pricing

- Psychological Pricing

- Geographic Pricing

Term
Differential Pricing Strategies
Definition

- Negotiated Pricing

* establishing a final price through bargaining

 

- Secondary-Market Pricing

*setting one price for the primary market and a different price for another market

 

- Periodic Discounting

*temporary reduction of prices on a patterned or systematic basis

Term
New-Product Pricing Strategies
Definition

- Price Skimming

- Penetration Pricing

Term

Define:

Price Skimming

Definition
- charging the highest possible price that buyers who desire the product will pay
Term

Define:

Penetration Pricing

Definition
- setting prices below those of competing brands to penetrate a market and gain a significant market share quickly
Term
Product-Line Strategies
Definition

- Captive Pricing

*pricing the basic product in a product line low while pricing related items at a higher level

 

- bait pricing

*pricing an item in the product line low with the intention of selling a higher-priced item in the line

 

- price lining

*setting a limited number of prices for selected groups or lines or merchandise

Term
Psychological Pricing Strategies
Definition

- bundle pricing

* packaging together two or more complementary products and selling them for a single price

 

- multi-unit pricing

*packaging together two or more identical products and selling them for a single price

 

- everyday low prices

*setting a low price for products on a consistent basis

 

- odd-even pricing

* ending the price with certain numbers to influence buyers' perceptions of the price or product

 

- prestige pricing

- setting prices at an artificially high level to convey prestige or quality image

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