Term
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Definition
| price is the sum of the values customers exchange for the benefit of having or using the product or service. Price is what the customer is prepared to pay |
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Term
| what are some of the two types of factors that influence pricing decisions? |
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Definition
Internal factors: marketing objectives, marketing mix strategies, costs, organizational considerations
External factors: nature of the market and demand, competition, environmental factors (government, economy, resellers, ect.) |
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Term
| how do marketing objectives affect pricing decisions? |
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Definition
| marketing objectives decide on the strategy for the product/service and establish the desired outcome of the pricing strategy. |
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Term
| how does the marketing mix strategy affect pricing decisions? |
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Definition
| Pricing decisions must be coordinated with product, place, promotion, process, and people |
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Term
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Definition
| the market consists of many buyers and sellers trading in a uniform commodity. no single buyer or seller has much effect on the going market price. |
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Term
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Definition
| the market consists of many buyers and sellers. a range of prices occur because sellers can differentiate their offers to the buyers |
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Term
| oligopolistic competition |
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Definition
| the market consists of a few sellers who are highly sensitive to each other's pricing and marketing strategies. the product can be uniform or non uniform. the sellers are few because it is difficult for new sellers to enter the market |
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Term
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Definition
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Term
| "in the end, the _______ will decide if the price is right" |
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Definition
| in the end, the consumer will decide if the price is right |
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Term
| "_____ set the lower limits of prices, whereas the _____ and _____ set the upper limits." |
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Definition
| costs set the lower limits of prices, whereas the market and demand set the upper limits |
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Term
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Definition
| if price changes, demand changes by a small percentage |
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Term
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Definition
| if price changes, demand changes by a large percentage |
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Term
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Definition
| cost based pricing is the simplest pricing method. it involves adding a standard mark up to the cost of the product |
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Term
| how is break even analysis and target profit pricing used? |
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Definition
| the company tires to determine the price at which it will break even or make the target profit it is seeking by using break even analysis and target profit pricing. |
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Term
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Definition
| value based pricing uses the customer's perception of value, not the sellers, ast the key to pricing. Price is often a surrogate indicator of quality, so the company uses the non-price variables in the marketing mix to build up perceived value in the buyer's mind and then set the price to match that perceived value. |
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Term
| what are the differences between value based and cost based pricing? |
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Definition
| cost based pricing begins with the product and doesn't place a high level of consideration on the value of the product or the customer. in contrast, value based pricing begins with the customer and the value of the product and allocates much less consideration and focus to the actual cost of the product. |
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Term
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Definition
| For many industrial products such as equipment or cars, purchases are evaluated by their economic lives so the perceived costs extend well beyond the price charged (installation, maintenance, etc.) Therefore, comparisons between competitors for these products goes beyond straight price assessment |
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Term
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Definition
| For going rate pricing, the company sets its prices largely based on competitors' prices with less attention paid to its own costs or demand. This is evident when smaller firms follow the leader; they change their prices when the market leader's prices change rather than when their own demand or costs changes. |
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Term
| what are the 3 types of competition based pricing? |
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Definition
1. economic value pricing
2. going rate pricing
3. sealed bid/ tender |
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Term
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Definition
| using sealed bid pricing, a company bases its price on how it thinks competitors will price rather than on its own costs or demands. |
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Term
| performance based pricing |
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Definition
| this pricing approach is an arrangement in which the seller is paid on the basis of actual performance of its offer |
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Term
| what are the 3 pricing strategies for existing products? |
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Definition
1. above the market: pricing the products higher than similar products sold by competitors
2. below the market: pricing the product below the market price by accepting a lower profit margin or by keeping costs low
3. at the market: pricing the product to reflect the market price for the product |
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Term
| what are the pricing strategies for new products? |
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Definition
1. skimming price strategy
2. penetration price strategy |
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Term
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Definition
| A high price is set so that while the organization has fewer sales, their profit margin is larger. Usually the firm will lower the price later in order to capture more price sensitive segments of the market. If this strategy is used, it is vital that quality and image match the high price and that the costs of production aren't too high |
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Term
| penetration price strategy |
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Definition
| in penetration price strategy a low price is set in order to gain a larger market share. The high volume of sales results in lower costs for the business making it a good strategy for price sensitive markets. Production and distribution costs fall with volume of sales, and this strategy can e an effective way to create a barrier to entry for competitors |
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Term
| what are the product mix and service mix pricing strategies? |
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Definition
1. product/service line pricing
2. optional product/service pricing
3. captive product/service pricing
4. by product pricing
5. product bundle pricing |
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Term
| product/service line pricing |
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Definition
| setting the price steps between various products in a product line base don the cost differences between the products, customer evaluation of different features and competitors prices. |
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Term
| optional product/service pricing |
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Definition
| the pricing of optional or accessory products along with a main product |
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Term
| captive product/service pricing |
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Definition
| the pricing of products that must be used along with a main product |
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Term
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Definition
| setting a price for by products in order to make the main products price more competitive (example?) |
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Term
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Definition
| combining several products and offering the bundle at a reduced price |
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Term
| what are the 7 price adjustment strategies? |
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Definition
1. discount pricing and allowances
2. segmented pricing
3. psychological pricing
4. promotional pricing
5. value pricing
6. geographic pricing
7. international pricing |
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Term
| discount pricing and allowances |
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Definition
| cash discounts, quantity discounts, seasonal discounts |
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Term
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Definition
| different prices for different customers, product forms, places or times |
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Term
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Definition
| adjust price to communicate more effectively a product's intended positioning- the price is used to say something about the product |
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Term
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Definition
| temporarily pricing products below the list price and sometimes even below cost to increase short run sales |
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Term
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Definition
| offers just the right combination of quality and good service at a fair price (end of season fashion) |
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Term
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Definition
deciding how to price to distant customers
ex- telephone rate, shipping |
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Term
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Definition
| adjust the price to meet different conditions and expectations in different world markets (product prices in developed vs. developing countries) |
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Term
| How does the product aspect of the marketing mix affect price? |
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Definition
| Attributes of the product influence its perceived value. the brand equity, warranties, styling, durability, performance and quality of work all reflect the products value so price should be consistent with positioning. |
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Term
| How does the place aspect of the marketing mix affect price? |
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Definition
| place needs to be considered when pricing to ensure that the final consumer gets the product at the expected price and the intermediaries get adequate margins to continue distribution |
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Term
| How does the promotion aspect of the marketing mix affect price? |
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Definition
| expenditure on advertising and other activities reinforces the value of the product in the mind of the consumer. price must be consistent with the promotional strategy and image |
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