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