Podcast
Questions and Answers
What happens to price competition when exit barriers are high for some or all category participants?
What happens to price competition when exit barriers are high for some or all category participants?
- It is likely to be fierce (correct)
- It is likely to be low
- It does not exist
- It remains unchanged
What is an example of a product that uses complementary pricing?
What is an example of a product that uses complementary pricing?
- Razors and blades
- Private golf clubs
- Telephone services
- All of the above (correct)
Why does Gillette price razors modestly?
Why does Gillette price razors modestly?
- To compete with other razor makers
- To reduce production costs
- To attract more customers
- To make huge margins on blades (correct)
What is the result of having many substitute technologies or solutions to customer problems?
What is the result of having many substitute technologies or solutions to customer problems?
What is a characteristic of complementary pricing?
What is a characteristic of complementary pricing?
What type of pricing is used for services with fixed and variable components?
What type of pricing is used for services with fixed and variable components?
What affects available pricing flexibility?
What affects available pricing flexibility?
What is an example of a product that has a fixed monthly fee and a variable usage fee?
What is an example of a product that has a fixed monthly fee and a variable usage fee?
What happens to prices when suppliers have high power?
What happens to prices when suppliers have high power?
What is the result of high supplier power on the prices of goods or services?
What is the result of high supplier power on the prices of goods or services?
What affects the prices when suppliers have high power?
What affects the prices when suppliers have high power?
What is the relationship between supplier power and prices?
What is the relationship between supplier power and prices?
What happens to unit costs when suppliers have high power?
What happens to unit costs when suppliers have high power?
What is the effect of high supplier power on the producer's profit?
What is the effect of high supplier power on the producer's profit?
What is the result of high supplier power on the prices of raw materials?
What is the result of high supplier power on the prices of raw materials?
How does high supplier power affect the prices of goods or services?
How does high supplier power affect the prices of goods or services?
What is a characteristic of an industry with high competitive rivalry?
What is a characteristic of an industry with high competitive rivalry?
What is an example of an exit barrier?
What is an example of an exit barrier?
What is price bundling?
What is price bundling?
What is the goal of competitive pricing?
What is the goal of competitive pricing?
What is an example of complementary products?
What is an example of complementary products?
What is a factor that can affect the level of exit barriers?
What is a factor that can affect the level of exit barriers?
What is the result of high rivalry in an industry?
What is the result of high rivalry in an industry?
What is a key aspect of competitive pricing?
What is a key aspect of competitive pricing?
Study Notes
Pricing Strategies
- Skimming (Prestige Pricing): charges a high initial price, returning more value to the producer; attracts price-sensitive customers later
- Penetration Pricing: opposite of skimming, aims to attract customers with a low initial price
Buyer and Supplier Power
- High buyer power tends to depress prices, pressuring products to deliver a good value/price ratio
- High supplier power raises the floor beneath which prices cannot be set, increasing unit costs
Pricing Tactics
Product Line Pricing
- Sets prices for a closely related set of products, often used for products used together (e.g., razors and blades)
- Can differ in small ways, such as product features (e.g., 17-inch vs. 21-inch color TV)
Other Pricing Tactics
- Price Bundling: offers a set of products as a package, often priced lower than individual components
- Complementary Pricing: used for services with fixed and variable components (e.g., private golf clubs, telephone services)
- Competitive Pricing: sets prices based on competitors' prices, maintains a "competitive" price by mimicking a particular competitor or pricing at the category average
Industry Conditions Affecting Price Flexibility
- High unused capacity can lead to price wars
- High exit barriers (e.g., substantial investment in plant and equipment) can manifest in strong price competition
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Description
This quiz covers marketing concepts such as pricing strategies, including penetration pricing and skimming, as well as the power of buyers and suppliers.
