Principles of Marketing Final
What are demand-based methods?
-Skimming pricing -Penetration pricing -Prestige pricing -Odd-even pricing -Bundle pricing
What are the 4 main parts of the Promotional Mix?
-Advertising -Personal Selling -Sales Promotion -Publicity
What are competition-based pricing strategies?
-Customary Pricing -Loss Leader Pricing -Sealed Bid Pricing
What are some demand factors?
-Customer taste -Price -Availability of other products -Consumer Income
What are some forms of false advertising?
-Deceptive Reference Prices -Loss-Leader Pricing -Bait and Switch
How do you estimate demand?
-Demand Curve -Demand Factors -Price Elasticity (elastic/inelastic)
What are the "constraints" in the first step of setting prices?
-Demand for product or brand -Newness of product (stage in Product Life Cycle) -Cost of producing/marketing a product -Type of competitive market (monopoly, oligopoly, etc.)
What are some pricing objectives?
-Profit -Sales -Market Share -Unit Volume -Survival -Social Responsibility
What are cost-based methods?
-Standard Markup Pricing -Cost Plus Percentage of Cost Pricing -Experience Curve Pricing
What are the steps in setting prices?
1. Identifying Pricing Constraints or Objectives 2. Estimating Demand and Revenue 3. Determining Cost, Value, and Profit Relationships 4. Select an Appropriate Price Level 5. Set the List or Quoted Price 6. Make Special Adjustments to the List or Quoted Price
What is Penetration Pricing?
Setting a low initial price on a new product to appeal immediately to the mass market
What are Cash Discounts?
A discount offered to a customer to entice them to pay their bill quickly Ex. $1000 - 2/10 net 20: seller will take off 2% if you pay within 10 days. If not, the full amount must be paid within 20 days
When is pricing a problem?
A firm must set a price for the first time, circumstances lead a firm to consider a price change, competition initiates a price change, company produces several products that have interrelated demands
What is the Break-Even Analysis?
A technique that analyzes the relationship between total revenue and total cost to determine profitability at various levels of output
What is Customary Pricing?
Setting price dictated by tradition
What is Standard Markup Pricing?
Add a standard markup to the product's cost. this method only works when it brings in expected number of sales. Popular because easier to estimate costs than demand
What is inelastic demand?
An increase or decrease in price will not significantly affect demand for the product
How is the Break-Even Point (BEP) Calculated?
BEP = fixed cost / (unit price - unit variable cost)
What is Sealed Bid Pricing?
Bid your price and seal it and the seller will open and chose the best offer
What is Bundle Pricing?
Bundles goods/services together for a lower price
What is elastic demand?
Consumers buy more or less of a product when the price changes
What is a Pull Strategy?
Convince consumers to buy the product (pull customers to you)
What is a Push Strategy?
Convince middle-man to sell the product
What are Seasonal Discounts?
Discounts offered to encourage buyers to buy earlier than what current demand requires
What are Quantity Discounts?
Discounts offered to encourage customers to buy in larger amounts
What is Loss Leader Pricing?
Pricing a handful of items temporarily below cost to drive traffic
What is Odd-Even Pricing?
Odd-even pricing involves setting prices a few dollars or cents under an even number. Psychologically, a $499.99 price feels lower than $500.00, even though the difference is just 1 cent.
What is value defined as?
Perceived quality / price
Which of the 4Ps is the only source of income?
Price
What is Price Fixing?
Price fixing occurs when a group of companies agree to limit supply and charge identical prices for their goods/services
What are the 4Ps of a marketing mix?
Product, Price, Place, Promotion
What is Prestige Pricing?
Setting a high price so quality or status-conscious consumers will be attracted to the product
What is Price Discrimination?
Selling the same good at different prices to different buyers
What is Skimming Pricing?
Setting the highest initial price that customers who really desire the product are willing to pay
What is Cost Plus Percentage of Cost Pricing?
Setting the price of a product or service by adding a fixed percentage to the total unit cost
What is Predatory Pricing?
The pricing of a product below cost with the intent to drive competitors out of the market.
What is the Break-Even Point (BEP)?
The quantity at which total revenue and total costs are equal and beyond which profits occur
What is Experience Curve Pricing?
Unit cost decreases between 10% and 30% each time a firm's experience doubles