marketing chapter 11-pricing strategies
price adjustment strategy
adjusting basic prices to account for various customer differences and changing situations
price sensitive
cutting your price or launching a low price fighter brand may be necessary when the market is particularly ____________ ___________
product line pricing, optional product pricing, captive product pricing, by-product pricing, product bundle pricing
five main product mix pricing strategies
may think you're cutting price due to desire to gain market share, boost your declining sales, increase total demand
how may competitors view prices changes?
may view increase as improvement in quality or just greed, may view decrease as increase as value or decrease in quality
how may consumers view price changes?
maintain current price, reduce price, raise perceived value of your product, increase quality and price, launch low price fighter brand
if you notice that your competitor changes the price of their product and you determine that this price will negatively affect your market share, what are 5 actions you can take
low, high
in captive product pricing, products often set the main product at a ____________ price and the supplies for the main product at a _________ price
international pricing
price adjustment strategy of deciding what prices to charge in different countries
reference prices
prices that buyers carry in their minds and refer to when they look at a given product may be formed by current prices, past prices, or assessing the buying situation PART OF PSYCHOLOGICAL PRICING
uniform delivered pricing
pricing in which a company charges the same price plus freight to all customers regardless of their locations freight charge is set at average freight cost some people pay more than they normally would, some people pay less
product bundle pricing
product mix pricing strategy combining several products and offering the bundle at a reduced price can promote the sale of products consumers might not otherwise buy ex-combo meal at a fast food restaurant
optional product pricing
product mix pricing strategy pricing of optimal or accessory products along with a main product ex-navigation system in a car, water dispenser on a fridge, etc.
by-product pricing
product mix pricing strategy setting a price for by products to help you offset the costs of disposing them and help make the main product's price more competitive TRASH TO CASH ex-cheese makers sell brine to cities that use it to treat roads
captive product pricing
product mix pricing strategy setting a price for products that must be used along with a main product, such as blades for a razor or games with console
product line pricing
product mix pricing strategy setting the price steps between various products in a product line based on cost differences between the products, customer evaluations of different features, and competitors' prices ex-setting different prices between starter, deluxe, primary versions of turbo tax based on how customers evaluate the features of each one
allowance
promotional money paid by manufacturers to retailers in an agreement to feature the manufacturer's product in some way ex-trade in allowance, promotional allowance (price reduction that rewards dealer for participating in an ad)
market skimming
setting a high price for a new product to skim max revenues layer by layer for segments willing to pay the high price' make fewer but more profitable sales ex-releasing a really expensive phone each year and then decreasing its price as new models are released
market penetration
setting a low price for a new product in order to attract a large number of buyers and a large market share high sales volume results in falling costs, allowing companies to cut prices even further
true
true/false many companies are now trying to appeal and market towards the poorest customers in the world with smaller, more basic and affordable products for their markets
false
true/false predatory pricing and price fixing are both legal
false
true/false price is not an important quality signal when consumers lack information or skill
true
true/false retail price maintenance is illegal
true
true/false segmented prices need to reflect real differences in customers' perceived value
false
true/false suggested prices are illegal
true
true/false we need cues to know whether we're receiving a good price on a product or not ex-ending price with .99 to indicate a bargain, ending with.0 to indicate higher quality product
false (costs are most important)
true/false when setting international prices, values are the most important thing to consider
true
true/false whenever possible you should find ways to meet higher costs or demand without raising prices
scanning fraud, price confusion
two deceptive pricing issues
market skimming, market penetration
two main strategies for setting the price of a single new product
inflation, too much demand
two major factors in iniating price increases
fob origin pricing, expensive for distant customers
type of geographic pricing pricing in which goods are placed free on board a carrier; customer pays the fright from factory to the destination what's the disadvantage of this pricing?
basing point pricing
type of geographic pricing pricing in which seller designates some city as a basing point and charges all customers the freight cost from that city to the customer ex-setting Atlanta as basing point and charging customer the freight cost of shipping from Atlanta to wherever they're located
zone pricing
type of geographic pricing pricing in which the company sets up two or more zones. All customers within a zone pay the same total price; the more distant the zone, the higher the price falls between fob origin and uniform pricing ex-setting a west zone where everyone pays $150, an east zone where everyone pays $100, etc.
freight absorption costing
type of geographic pricing pricing in which seller absorbs all or part of the freight charges in order to get the desired business used for market penetration and to hold onto very competitive markets
dynamic and online pricing
type of price adjustment strategy adjusting prices continually to meet the characteristics and needs of individual customers and situations ex-hotels, airlines, retailers change prices on the fly according to changes in demand, costs, or competitor pricing
discount and allowance pricing
type of price adjustment strategy offering discounts and allowances to reward customers for paying bills early, buying in bulk, or off season buying
psychological pricing
type of price adjustment strategy pricing that considers the psychology of prices and not simply the economics; price is used to say something about the product ex-setting a higher price on an item to make it be perceived as being of higher quality
segmented pricing
type of price adjustment strategy selling a product or service at two or more prices, where difference in prices is not based on differences in cost ex-movie theater charging different prices for for kids, adults, old people
geographic pricing
type of price adjustment strategy setting pries for customers located in different parts of the country or the world ex-FOB origin pricing, uniform delivered pricing, zone pricing, basing point pricing, etc.
promotional pricing
type of price adjustment strategy temporarily pricing products below the list price to increase short run sales can help move customers over hump in buying decision process ex-offering discounts on normal prices, special event pricing during holidays
robinson patman act
what acts seeks to prevent unfair price discrimination
customer segment, product form pricing (diff price for first class and coach), location based pricing (diff price for out of state and in state students), time based pricing (vary price by season, month, day, hour)
what are a few types of segmented pricing
use these reference prices when setting prices for your products ex-offering very expensive versions of a product to make your already expensive version look more affordable
what can you do with reference prices as a seller?
making customers only want to buy you product on sale
what do you want to avoid in promotional pricing
two part pricing
what is captive product pricing called when used with services
explain to customers why you're increasing prices
what should you do to help avoid being seen as a price gouger when you raise prices?
not giving customer in higher price tiers their money's worth, treating customers in lower price tiers poorly
what to avoid when doing segmented pricing
when number of firms is small, buyers are well informed, product is uniform
when are competitors more likely to react to changes your price?
when they discriminate based on age, gender, etc.
when is dynamic pricing illegal
deceptive pricing
when sellers state prices of price savings that are misleading or not actually available to customers
market is highly price sensitive, low price keeps out competition
when should you use market penetration
can lead to price wars between competitors as they hold onto market share
why are price cuts bad sometimes
try to dominate market through lower costs (economy of scale or lower costs to begin with), beneficial when you have excess capacity or falling demand
why might you initiate price cuts?
eroding trust of customers, price wars with competitors
why to avoid when dynamic pricing