MTG 315- CH 20

New product Pricing

Price Skimming-the organization charges the highest price that buyers who most desire the product will pay Penetration Pricing-is a low price designed to penetrate a market and gain a significant market share quickly.

Identify issues related to developing pricing objectives

Pricing objectives are overall goals that describe the role of price in a firm's long-range plans. There are several major types of pricing objectives. The most fundamental pricing objective is the organization's survival. Price can usually be easily adjusted to increase sales volume or combat competition to help the organization stay alive. Profit objectives, which are usually stated in terms of sales dollar volume or percentage change, are normally set at a satisfactory level rather than at a level designed to maximize profits. A sales growth objective focuses on increasing the profit base by raising sales volume. Pricing for return on investment (ROI) has a specified profit as its objective. A pricing objective to maintain or increase market share links market position to success. Other types of pricing objectives include cash flow, status quo, and product quality.

Describe the bases used for setting prices

The three major dimensions: 1.cost-the firm determines price by adding a dollar amount or percentage to the cost of the product. Two common cost-based pricing methods are cost-plus and markup pricing. 2. demand-is based on the level of demand for the product. To use this method, a marketer must be able to estimate the amounts of a product that buyers will demand at different prices. Demand-based pricing results in a high price when demand for a product is strong and a low price when demand is weak. 3. competition-costs and revenues are secondary to competitors' prices

Discuss the importance of identifying the target market's evaluation of price

Assessing the target market's evaluation of price tells the marketer how much emphasis to place on price and may help determine how far above the competition the firm can set its prices. Understanding: 1.how important a product is to customers relative to other products, 2. as well as customers' expectations of quality, 3. helps marketers correctly assess the target market's evaluation of price

Which of the following actions is taken by a firm whose pricing objective is cash flow?

Setting price levels to encourage rapid sales

Explain how marketers analyze competitors' prices

This allows the firm to keep its prices in line with competitors' prices when nonprice competition is used. If a company uses price as a competitive tool, it can price its brand below competing brands.

What is a pricing strategy?

A pricing strategy is an approach or a course of action designed to achieve pricing and marketing objectives. Pricing strategies help marketers solve the practical problems of establishing prices. The most common pricing strategies are differential pricing, new-product pricing, product-line pricing, psychological pricing, professional pricing, and promotional pricing.

Describe the selection of a specific price

A pricing strategy will yield a certain price or range of prices. Pricing strategies should help in setting a final price. If they are to do so, marketers must establish pricing objectives, have considerable knowledge about target market customers, and determine demand, price elasticity, costs, and competitive factors. Additionally, the way marketers use pricing in the marketing mix will affect the final price. Pricing remains a flexible and convenient way to adjust the marketing mix

Price skimming provides the most flexible base price in the _____ stage of the product lifecycle.

introduction

Price leaders

are products priced below the usual markup, near cost, or below cost. Special-event pricing involves advertised sales or price cutting linked to a holiday, season, or event. Marketers that use a comparison discounting strategy price a product at a specific level and compare it with a higher price

Psychological pricing

attempts to influence customers' perceptions of price to make a product's price more attractive. 1. reference pricing, marketers price a product at a moderate level and position it next to a more expensive model or brand 2. Bundle pricing is packaging together two or more complementary products and selling them at a single price. With 3. multiple-unit pricing, two or more identical products are packaged together and sold at a single price. 4. To reduce or eliminate use of frequent short-term price reductions, some organizations employ everyday low pricing (EDLP), setting a low price for products on a consistent basis. 5. odd-even pricing, marketers try to influence buyers' perceptions of the price or the product by ending the price with certain numbers. 6. Customary pricing is based on traditional prices. With 7. prestige pricing, prices are set at an artificially high level to convey prestige or a quality image.

Pricing the basic product in a product line low, while pricing related items higher is known as _____.

captive pricing

Product-line pricing

establishes and adjusts the prices of multiple products within a product line. This strategy includes 1. captive pricing, in which the marketer prices the basic product in a product line low and prices related items higher. 2. Premium pricing is setting prices on higher-quality or more versatile products higher than those on other models in the product line. 3. Bait pricing is when the marketer tries to attract customers by pricing an item in the product line low with the intention of selling a higher-priced item in the line. 4. Price lining is when the organization sets a limited number of prices for selected groups or lines of merchant

Professional pricing

is used by people who have great skill or experience in a particular field, therefore allowing them to set the price. This concept carries the idea that professionals have an ethical responsibility not to overcharge customers. As an ingredient in the marketing mix, price is often coordinated with promotion. The two variables are sometimes so closely interrelated that the pricing policy is promotion-oriented. Promotional pricing includes price leaders, special-event pricing, and comparison discounting.

When an organization sets a limited number of prices for selected groups or lines of merchandise, it is said to be using _____.

price lining

differential pricing

they charge different buyers different prices for the same quality and quantity of products. For example, with 1. negotiated pricing, the final price is established through bargaining between seller and customer. 2.Secondary-market pricing involves setting one price for the primary target market and a different price for another market. Oftentimes the price charged in the secondary market is lower. Marketers employ 3. periodic discounting when they temporarily lower their prices on a patterned or systematic basis because of such reasons as a seasonal change, a model-year change, or a holiday. 4. Random discounting occurs on an unsystematic basis.