Podcast
Questions and Answers
What is the primary focus of customer value-based pricing?
What is the primary focus of customer value-based pricing?
Which of the following is NOT one of the three major pricing strategies?
Which of the following is NOT one of the three major pricing strategies?
What does understanding customer value perceptions primarily impact?
What does understanding customer value perceptions primarily impact?
Which factor is NOT considered when setting prices?
Which factor is NOT considered when setting prices?
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How do companies adjust their pricing strategies?
How do companies adjust their pricing strategies?
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What is the primary focus of value-based pricing?
What is the primary focus of value-based pricing?
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Which of the following is NOT a type of cost associated with cost-based pricing?
Which of the following is NOT a type of cost associated with cost-based pricing?
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How does competition-based pricing evaluate the market?
How does competition-based pricing evaluate the market?
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Cost-plus pricing involves which of the following practices?
Cost-plus pricing involves which of the following practices?
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What external factor is most important in setting a price using competition-based pricing?
What external factor is most important in setting a price using competition-based pricing?
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What is a typical outcome of break-even pricing?
What is a typical outcome of break-even pricing?
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What is the main aim of customer value-based pricing?
What is the main aim of customer value-based pricing?
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What is segmented pricing primarily based on?
What is segmented pricing primarily based on?
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Which of the following is NOT a form of promotional pricing?
Which of the following is NOT a form of promotional pricing?
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What does psychological pricing primarily consider when setting prices?
What does psychological pricing primarily consider when setting prices?
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What is dynamic pricing most commonly associated with?
What is dynamic pricing most commonly associated with?
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Which pricing strategy involves setting prices to reflect local market conditions?
Which pricing strategy involves setting prices to reflect local market conditions?
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What is the purpose of reference prices in psychological pricing?
What is the purpose of reference prices in psychological pricing?
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Which of the following is a method of geographical pricing?
Which of the following is a method of geographical pricing?
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What is a common characteristic of promotional pricing strategies?
What is a common characteristic of promotional pricing strategies?
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Which factor does NOT influence the pricing decisions of international companies?
Which factor does NOT influence the pricing decisions of international companies?
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What is the primary goal of market-skimming pricing?
What is the primary goal of market-skimming pricing?
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Which pricing strategy involves setting a low price to attract a large number of buyers?
Which pricing strategy involves setting a low price to attract a large number of buyers?
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What does product line pricing entail?
What does product line pricing entail?
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Which of the following describes captive-product pricing?
Which of the following describes captive-product pricing?
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Why might a company use by-product pricing?
Why might a company use by-product pricing?
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What is a strategy used when a firm sells several products together for a single price?
What is a strategy used when a firm sells several products together for a single price?
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Which external factor does not affect a firm's pricing strategy?
Which external factor does not affect a firm's pricing strategy?
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What is the effect of market-penetration pricing when implemented successfully?
What is the effect of market-penetration pricing when implemented successfully?
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Which of the following best contributes to a firm's total product mix pricing strategy?
Which of the following best contributes to a firm's total product mix pricing strategy?
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Study Notes
Marketing: Pricing
- Pricing is the amount of money charged for a product or service.
- Pricing determines a firm's market share and profitability.
- Pricing produces revenue.
Objectives Outline
- 9.1: Defining price, identifying three major pricing strategies, and discussing the importance of understanding customer value perceptions, company costs, and competitor strategies.
- 9.2: Identifying and defining external and internal factors affecting pricing decisions.
- 9.3: Describing major strategies for pricing new products.
- 9.4: Explaining how companies find a set of prices that maximizes profits from the total product mix.
- 9.5: Discussing how companies adjust and change prices to account for different customer types and situations.
- 9.6: Discussing major public policy concerns and key legislation affecting pricing decisions.
Customer Value-Based Pricing
- Based on buyers' perceptions of value, not seller's cost.
- Price is considered before the marketing program.
- Types of value-based pricing include good-value pricing and value-added pricing.
Cost-Based Pricing
- Based on the costs of producing, distributing, and selling a product plus a fair rate of return for work and risk.
- Types of costs: fixed costs (overhead), variable costs, total costs.
Types of Cost-Based Pricing
- Cost-plus pricing (markup pricing): Adding a standard markup to the cost of the product.
- Break-even pricing (target return pricing): Setting price to break even on costs of making and marketing a product, or setting price to make a target return.
Competition-Based Pricing
- Setting prices based on competitors' strategies, costs, prices, and market offerings.
- Important questions to assess competitors' strategies:
- How does the company's offering compare in terms of customer value?
- How strong are current competitors?
- What are their current pricing strategies?
New Product Pricing Strategies
- Market-skimming pricing (price skimming): Setting a high price to quickly skim revenues from segments willing to pay high prices.
- Market-penetration pricing: Setting a low price to attract a large number of buyers and a large market share.
Product Mix Pricing
- Product line pricing: Setting prices across an entire product line.
- 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.
- By-product pricing: Pricing low-value by-products to get rid of them or make money on them.
- Product bundle pricing: Pricing bundles of products sold together.
Price Adjustment Strategies
- Discount and allowance pricing: Reducing prices to reward responses like volume purchases, early payments, or promotions.
- Segmented pricing: Adjusting prices to account for differences in customers, products, or locations. (Customer-segment, product-form, location-based, time-based).
- Psychological pricing: Adjusting prices for psychological effect.
- Promotional pricing: Temporarily reducing prices to drive short-term sales.
- Geographical pricing: Adjusting prices to account for customer geographic location (FOB-origin, uniform-delivered, zone, basing-point, freight-absorption).
- Dynamic pricing: Continuously adjusting prices to meet individual customer characteristics and needs.
- International pricing: Adjusting prices for international markets.
Initiating Price Changes
- Reasons for price cuts: Excess capacity, falling demand, attempting to dominate the market.
- Reasons for price increases: Cost inflation, over-demand.
Responding to Price Changes
- Buyer's perspective: Price increases perceived as exclusive/better quality, but also as greedy; price cuts perceived as getting better deals, better quality product, but as indication of damaged quality/company's image.
- Competitor's perspective: Price cuts to gain market share, trying to boost sales; price increase perceived as making the product exclusive/better and greedy.
Public Policy Issues in Pricing
- Public policy concerns in pricing: retail price maintenance, price-fixing, predatory pricing, discriminatory pricing, deceptive pricing.
Other Internal and External Considerations
- Internal: Overall marketing strategy, objectives, and mix; organizational considerations.
- External: Market and demand, economy, impact on other companies and parties in the environment.
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Description
Explore the fundamental concepts of pricing in marketing, including various strategies and factors influencing pricing decisions. This quiz covers customer value perceptions, pricing new products, and adjusting prices for different customer segments. Test your understanding of how pricing affects a firm's profitability and market share.
