MKTG Ch 14

profit oriented price level approaches

-target profit -target return on sales -target return on investment

What are two general methods for quoting prices related to transportation costs

FOB origin pricing Uniform delivered pricing

price war

companies continuing to cut prices and average price is too low and then everyone loses

When Lexmark sells a laser printer for slightly below its cost, but prices its ink-jet printers with a large profit margin that makes up for the loss on the laser printers, it is using

product line pricing

When a manufacturer produces several products that are substitutes for one another and others that complement these products, it should use

product line pricing

When a marketing manager sets prices for all items in a product line, seeking to produce a profit for the entire line but not necessarily each product, it is known as

product line pricing

target profit pricing

used when a firm sets a target of a specific dollar volume of profit (ex. a target profit of $7000 at an annual volume of 1000 units)

When using competition-oriented pricing approaches, price setters stress

what "the market" is doing

odd-even pricing

(also called psychological pricing) involves setting prices a few dollars or cents under and even number (ex. Galaxy phone price is $399.99)

prestige pricing

(product doesn't have to be new or have new technology) involves setting a high price so that quality or status conscious consumers consumers will be attracted to the product and buy it - positioned to be a product of luxury and indicate statues (ex. Rolex watches)

steps for setting the list of quoted price

-chose a price policy --> fixed or dynamic pricing policy -consider pricing effects of pricing on: - company (effect on substitute products - can take demand away from your own products -customers (perception of value, price has an effect on quality perception) -competitors (avoid a price war)

competition oriented price level approaches

-customary -above, at, or, below market -loss leader

determining the special adjustments to list or quoted price

-discounts --> quantity, seasonal, etc -allowances --> trade in, promotional, etc -geographical adjustments

Demand oriented price level approaches

-skimming -penetration -prestige -price lining -odd even - target - bundle - yield management

cost oriented price level approaches

-standard markup -cost plus -experience curve

(insert) oriented approaches to pricing regard expected customer tastes and preferences as the most important factors in the decision

Demand

Common approaches to pricing are oriented around which four elements

Demand Cost Profit Competition

In penetration pricing, the initial price of the product is set

Low, to appeal to the mass market

(insert) pricing is seen as the exact opposite of skimming pricing when introducing a new product

Penetration

Which two are profit-oriented approaches to setting a price

Target return pricing Target profit pricing

Yield management pricing is

a complex approach that continually matches demand and supply to customize the price for a service

price lining

a number of different pricing points used by firms selling not just a single product but a line of products (ex iPhone)

A one-price policy means that there is one price for

all buyers of the product

Select three special adjustments that are often made to the list of quoted price

allowances geographical adjustments discounts

experience curve pricing

approach based on the learning effect which holds that the unit cost of many products and services decline by 10 to 30 percent each time a firm's experience at producing and selling doubles; as a result, a rapid decline in price is possible (ex. HDTV have fallen over 40% in the past decade)

Demand-oriented, cost-oriented, profit-oriented, and competition-oriented are four approaches used to set

approximate price levels

above, at, or below market pricing

based on an estimate of the market price of a product or product class, marketing managers deliberately choose a strategy of above, at, or below market pricing (ex. retailers private brands)

The marketing of two or more products in a single package price is know as (insert) pricing

bundle

(insert) oriented approaches to pricing set the price to reflect the way the marketer wants consumers to interpret prices relative to competitor's offering

competition

What is a characteristic of bundle pricing

consumer value is enhanced by not having to make separate purchases

Pricing approaches that consider the production and marketing costs and then add enough to cover direct expenses, overhead, and profit are (insert) approaches

cost oriented

loss leader pricing

deliberately selling a product below its customary price, not to increase sales, but to attract customers' attention to it in hopes that they will buy other products with large markups as well (fishing pricing)

standard markup pricing

entails adding a fixed percentage to the cost of all items in a specific product class -specifically used by resellers with a large number of products that estimating demand for each product as a means of setting price is impossible

Demand-oriented pricing approaches weigh which factors most heavily

expected customer tastes and preferences

(insert) are made by manufacturers to list prices to reflect the cost of transportation of the products from seller to buyer

geographical adjustments

Prestige pricing involves setting a (insert) price for a product so that (insert) consumers will be attracted to the product and buy it

high; quality conscious

skimming pricing

highest initial price, new or innovative products, customers willing to pay (ex original Xbox one)

complementary pricing

in order for you to use one product, you need the complementary product -don't have as much profit in one product but make it up on the other complementary product

cost plus pricing

involves summing the total unit cost of providing a product or service and adding a specific amount to the cost to arrive at a price -similar to standard markup pricing, but mostly used by manufacturers and service providers, especially in B2B transactions (ex. architectural firms)

step 6 in strategic pricing

make special adjustments to list or quoted price

In target pricing,

manufacturers deliberately adjust the composition of a product to achieve the estimated price that consumers are willing to pay for it

In (insert) pricing, an organization sets a price a few dollars or cents under an even number, such as $3.99

odd-even

Sears offers a Craftsman radial saw for $499.99 rather than $500, using a(n) (insert) pricing approach

odd-even

Setting a price with no variation for the product buyers is called a (insert) policy

one-price

If a firm sells the same product to different buyers at different prices, it may be considered

price discrimination

charging different prices to different buyers for goods of like grade and quality is known as

price discrimination

When a line of products is priced at a number of different specific pricing points, the (insert) strategy is being used

price lining

Cost-oriented approaches to pricing consider which three things in the setting of a product's price

profit overhead production costs

By focusing on target profit pricing or target return pricing, a firm is using a (insert) pricing approach

profit-oriented

A price reduction offered to channel members for featuring the manufacturer's product in their advertising or selling activities is called a (insert) allowance

promotional

When a manufacturer offers a grocery retailer an extra amount of free product for including this product in weekly advertising and in-store sales, this is considered a (insert) allowance

promotional

Reductions in unit costs for a larger order are known as (insert) discounts

quantity

Customers are encouraged to buy a larger number of single products when a firm offers

quantity discounts

A marketing manager uses price lining when he

sells several groups of the same type of product, with each group priced at different specific pricing points

Step 4 in strategic pricing

set an approximate price level

step 5 in strategic pricing

set list or quoted price

customary pricing

setting a price that is dictated by tradition, a standardized channel of distribution, or other competitive factors. - a significant departure from this price may result in a loss of sales for the manufacturer (ex. candy bars offered through a standard vending machine)

target return on investment pricing

setting a price to achieve an annual target return on investment (ex. ROI of 10%)

target return on sales pricing

setting prices that provide a profit that is a specified percentage of the sales (ex 20% of return on sales at an annual volume of 1,250 units)

In what pricing strategy are prices lowered in a series of steps with the demand by those who really desire the product being satisfied at the highest prices

skimming

When a new product appeals to those segments of consumers who are willing to pay a high initial price to have an innovation first, marketers should use a (insert) pricing strategy

skimming

Discounts, allowances, and geographic adjustments are considered (insert) that affect the list or quoted price

special adjustments

In (insert) pricing, an organization estimates what consumers are willing to pay for a product, and work backward, accounting for markups by retailers and wholesalers, to determine what it can charge for the product

target

In (insert) pricing, an organization estimates what consumers are willing to pay for a product, and works backward, accounting for markups by retailers and wholesalers, to determine what it can charge for the product

target

yield management pricing

the charging of different prices to maximize revenue for a set amount of capacity at any given time; complex approach that continually matches demand and supply to customize the price for a service (ex. airlines, hotels, car rentals)

penetration pricing

the exact opposite of skimming pricing; low initial price on a new product to appeal immediately to the mass market; many segments of the market are price sensitive (ex amazon kindle fire tablet)

What is a marketer most likely trying to convey about a product if it is priced using prestige pricing

the product is of high quality

bundle pricing

two or more products in a single package price (ex. Expedia)

Charging different prices for a product in order to maximize revenue for a set amount of capacity at any given time is known as (insert) pricing

yield management