Marketing 310 Chapter 9

External factors

-Market and demand -Economy -Impact on other parties in its environment

cost-based pricing

Based on the costs of producing, distributing, and selling the product plus a fair rate of return for effort and risk

Companies have to think carefully when considering price changes. They must consider which of the following?

Buyer and competitor reactions

Which of the following pricing strategies would a company use to attract a large number of buyers quickly and win a large market share?

Market-penetration pricing

A company sets a high price on a new product it introduces to maximize revenue from various market segments. Which of the following new product pricing strategy is the company using?

Market-skimming pricing

Internal factors

Overall marketing strategy, objectives, and mix, organizational considerations

Of the following, which is NOT one of the product-mix pricing situations? - Product bundle pricing - Captive-product pricing - Penetration pricing - Optional-product pricing - Product line pricing

Penetration pricing

Of the following, which is the core element of our free-market economy?

Price competition

When Microsoft or Apple sells software as a package, it is engaging in what type of pricing?

Product bundle pricing

Marketers must consider external considerations in establishing pricing. Which of the following represents those external considerations?

The nature of the market and demand and other environmental factors

How do companies apply pricing strategies to accommodate differences in customer segments and situations?

They apply a variety of price adjustment strategies

oligopolistic competition

a market that is dominated by only a few large firms (auto industry)

Cost-plus pricing (markup pricing)

adding a standard markup to the cost of the product

dynamic pricing

adjusting prices continually to meet the characteristics and needs of individual customers and situations

international pricing

adjusting prices for international markets

psychological pricing

adjusting prices for psychological effect

geographical pricing

adjusting prices to account for the geographic location of customers

segmented pricing

adjusting prices to allow for differences in customers, products, or locations

When companies treat customers fairly and make certain they understand pricing and pricing terms, this leads to

building strong and lasting customer relationships

Price ceilings are set by customer perception. Which of the following sets the floor for the price that a company charges?

costs

elastic demand

demand changes greatly with a small change in price (luxury items)

Inelastic demand

demand hardly changes with a small change in price (necessities)

Value-added pricing

differentiates your products by adding features or services that your competitors don't have and that customers will pay more for

large companies

divisional or product managers

Perceived Value

how much a customer is willing to pay for a product or service

A company's pricing strategy is affected by internal factors such as

overall marketing strategy, objectives, marketing mix, and other organizational considerations

product bundle pricing

pricing bundles of products sold together

industries with price as the key factor

pricing departments

by-product pricing

pricing low-value by-products to get rid of or make money on them

optional-product pricing

pricing optional or accessory products sold with the main product

captive-product pricing

pricing products that must be used with the main product

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

Break-even pricing (target return pricing)

setting price to break even on the costs of making and marketing a product, or setting price to make a target return

Product line pricing

setting prices across an entire product line

competition-based pricing

setting prices based on competitors' strategies, prices, costs, and market offerings

Small companies

top management

promotional pricing

temporarily pricing products below the list price, and sometimes even below cost, to increase short-run sales

monopolistic competition

the market consists of many buyers and sellers trading over a range of prices rather than a single market price (restaurants)

pure competition

a term that describes a market that has a broad range of competitors who are selling the same products.

Marketers use three major pricing strategies:

customer value-based pricing, cost-based pricing, and competition-based pricing

Discount and allowance pricing

reducing prices to reward customer responses such as paying early or promoting the product

Good-value pricing

right combination of quality and good service at a fair price

Market-skimming pricing

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

pure monolopy

single source for a product, no real competition

Target costing

starts with an ideal selling price, then targets costs that ensure that the price is met