Influences on Customer Price Perceptions

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Questions and Answers

What is the 'pink tax'?

Higher prices for products marketed towards women compared to similar products for men (correct)

A tax on luxury goods targeted at men

The cost of products sold only to women

A discount offered for female customers

Price cues such as 'sale' next to a price can influence customer perceptions.

True

What does the compromise effect refer to?

The tendency of consumers to choose the middle option when presented with multiple options.

The approach that sets prices based on costs of production and marketing is called __________.

cost oriented approach Signup and view all the answers

Which pricing strategy uses multiple versions of a product at different price points?

Price lining Signup and view all the answers

Break-even pricing allows for profit generation.

False Signup and view all the answers

What is the primary goal of the demand-oriented pricing approach?

To set prices according to how much customers are willing to pay. Signup and view all the answers

Match the following pricing strategies with their descriptions:

Cost oriented approach = Sets prices based solely on costs Break-even pricing = Sets price to recover costs with no profit Mark-up pricing = Adds a standard profit margin to costs Demand-oriented approach = Prices based on consumer willingness to pay Signup and view all the answers

Which of the following strategies focuses on providing more benefits at a lower cost to the consumer?

Good-value pricing Signup and view all the answers

Penetration pricing is used when there are high barriers to entry in the market.

False Signup and view all the answers

What is the primary objective of price skimming?

To recover R&D investment quickly. Signup and view all the answers

_______ pricing is a strategy where customers decide how much they want to pay for a product.

Pay-what-you-want Signup and view all the answers

What is the main characteristic of value-added pricing?

It involves offering additional services to support higher prices. Signup and view all the answers

Geographical pricing is based on a customer's location.

True Signup and view all the answers

What is the purpose of relational pricing?

To build long-term relationships with customers. Signup and view all the answers

In __________ pricing, special events like Black Friday are used to attract customers.

promotional Signup and view all the answers

Which pricing strategy involves setting different prices for different customer segments?

Segmented pricing Signup and view all the answers

Study Notes

Influences on Customer Price Perceptions

Reference Price: The price buyers have in mind when evaluating a product. It acts as an anchor. A significantly lower sale price compared to the original price creates a perception of a great deal, leading to impulsive purchases. Conversely, an unrealistic anchor price can lead to distrust and consumer backlash due to readily available online price comparisons.
Pink Tax: Products marketed towards women tend to be more expensive than similar products marketed towards men.
Price Cues: Visual or textual elements influencing price perception include "sale," "lucky" prices, odd-numbered pricing (e.g., €599), and even-numbered pricing (often associated with higher quality, e.g., €1360).
Compromise/Decoy Effect: Consumers are often tempted by the middle option in a set of choices, especially when a larger option is also presented, making the middle option appear cheaper.
Price Bundling: Combining multiple products for a lower price can create perceived value, potentially driving larger volume purchases. However, it can make it difficult to later sell the items individually at a higher cost, leading to consumer cognitive dissonance.
Price Lining: Offering multiple versions of a product or service at different price points simultaneously. Low prices can be associated with lower quality.

Pricing Approaches

Cost-Oriented Approach: This pricing method bases prices on production and marketing costs. Lower costs can lead to lower prices, increased sales, and higher profits. It includes:
- Markup Pricing: A standard percentage is added to costs to determine the selling price.
- Break-Even Pricing: Setting the price so that costs are fully recovered; profits are zero.
Demand-Oriented Approach: Prices are determined by consumer demand.
Competitor-Oriented Approach: This approach bases pricing decisions on competitor prices. Avoid price wars by adjusting perceived product value rather than directly matching competitor prices.
Value-Oriented Approach: Prices are set based on perceived value to customers; this includes considering the value of competing offers and adjusting prices based on different consumer segments.

Pricing Strategies and Objectives

Premium Pricing: Setting prices to communicate the uniqueness of a product.
Economy Pricing: Setting low prices to attract price-sensitive customers.
Penetration Pricing: Starting with a low price to attract a large customer base and gain market share. Appropriate when competition is strong, demand is price-elastic, volume production is significant, entry barriers are low, product lifecycles are long, and economies of scale exist.
Price Skimming: Starting with a high price to recover research and development costs, then lowering it over time. Appropriate when demand is price-inelastic, barriers to entry are high, economies of scale are limited, and product lifecycles are short.
Target Costing: Establishing a desired selling price and then working backward to design a product that meets those cost constraints.

Pricing Management

List Pricing: Setting a single price for an offering.
Promotional Pricing: Reducing prices to attract customers. This includes discounts, delayed payment, loss leaders, special events (e.g., Black Friday), cash rebates, low-interest financing, extended warranties, and free maintenance.
Segmented Pricing: Setting prices for different customer groups (price discrimination). This includes pricing variations for different customer segments, product forms, locations, times, and channels.
Pay-What-You-Want Pricing: Customers choose their own price.
Dynamic Pricing: Adjusting prices based on individual customers and circumstances.

Business-to-Business Pricing

Geographical Pricing: Prices vary based on customer location. This includes Free-On-Board (FOB) pricing.
FOB Origin: Liability and ownership of the goods transfer to the buyer when the goods are loaded onto transport.
FOB Destination: Liability and ownership of the goods transfer to the buyer when the goods are unloaded from the transport at the destination.
Relational Pricing: Pricing strategies aiming to build long-term customer relationships through loyalty programmes, favorable payment terms, and excellent customer service.

Frequent Pricing Mistakes

Dropping prices too quickly.
Overemphasizing cost over value.
Failing to adjust prices based on market changes.
Setting prices independently from the rest of the marketing mix.
Insufficient use of differentiated pricing.

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Description

Explore the various factors that influence how consumers perceive prices, including reference pricing, the pink tax, and price cues. Understand the psychological effects of pricing strategies like the compromise effect and price bundling. This quiz will help you grasp the nuances of customer price perceptions.